Deals and IPOs

Government Loses Appeal to Stop Whole Foods Deal


Whole Foods Market said that it is free to complete its acquisition of rival Wild Oats Markets after a federal appeals court denied a request from U.S. antitrust authorities to temporarily block the deal.

Whole Foods' $565 million tender offer to buy Wild Oats shares expires at the close of business on Monday.

The U.S. appeals court in Washington, D.C. rejected the U.S. Federal Trade Commission's attempt to block the deal and dissolved a temporary injunction issued on Monday, the company said. An FTC spokesman was not immediately available for comment.

"We are pleased to have cleared what we expect to be our last legal hurdle," said John Mackey, chief executive of Whole Foods.  "We look forward to closing this merger."

The ruling was the latest setback for the FTC, which has sought to halt the merger while it determines whether merging the two companies would violate U.S. antitrust statutes. The FTC went to the U.S. appeals court last week after a lower court judge refused to temporarily halt the merger.

That lower court judge, Paul Friedman of the U.S. District Court, wrote a 93-page opinion that rejected the government's argument that the deal would be anti-competitive in two dozen markets and hurt consumers. The judge also ignored Whole Foods CEO John Mackey's e-mails expressing a desire to crush the smaller company.

Whole Foods contends that it competes against larger supermarket chains such as Safeway and not just small, premium stores such as Wild Oats.

The Consumer Federation of America also filed documents with the appeals court saying that the merger would lead to higher prices and fewer choices for buyers of organic products.

One antitrust expert said the FTC could very likely abandon its lawsuit. "I think the FTC has an uphill battle here," said Bruce McDonald, a former deputy attorney general at the Justice Department who is now in private practice.

"The FTC has not been shy about claiming narrow relevant markets," McDonald said. "They can't help but rethink their approach."

Austin, Texas-based Whole Foods operates nearly 200 stores in the United States and Britain, while Wild Oats of Boulder, Colorado, runs about 110. 

Keith Hylton, an antitrust professor at Boston University School of Law, said he did not expect the government to pursue its lawsuit. "If the appellate court sides with the district court, it's pretty much over (for the FTC)," Hylton said.