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FTC filing tells of 30 Wild Oats closings
Document error outs Whole Foods post-merger plan
Published August 15, 2007 at midnight
Whole Foods plans to close 30 or more Wild Oats stores if the $671 million transaction is allowed to go forward, federal regulators inadvertently said in a court filing.
Whole Foods has repeatedly said it won't know which, if any, Wild Oats stores it will close until Whole Foods is allowed to look at each store's financial information. Whole Foods spokeswoman Kate Lowery on Tuesday said that hasn't changed.
The Federal Trade Commission accidentally disclosed the number in a filing made public Tuesday. Large portions of court filings made by all parties in the case have been redacted in order to protect competitive information about Whole Foods, Wild Oats and other supermarkets.
Court officials realized that blacked-out portions of the document could be easily read and sent a new version to correct the problem within an hour. FTC spokesman Mitchell Katz declined to comment on the matter.
Among other details not meant to be released, the FTC revealed that Whole Foods bars suppliers from selling directly to competitors in order to raise Wal-Mart's costs. The filing also disclosed that the opening of a Whole Foods store can cut revenue by 30 percent or more at a nearby Wild Oats store.
Wild Oats operates 110 stores in 24 states, including 30 Henry's Farmers Market in California and eight Sun Harvest Farms stores in Texas. Whole Foods has agreed to sell those farmers market stores to private-equity firm Apollo Management LP for an undisclosed amount.
The accidental disclosure comes as both sides expect a ruling any day on whether Whole Foods can proceed with its planned purchase of Boulder-based Wild Oats. The FTC is seeking to block the deal, saying it will lead to higher prices for consumers of premium organic and natural foods.
Under the merger deal, Wild Oats and Whole Foods have until Aug. 31 to complete the transaction. After that, either side can walk away without paying the $15.2 million breakup fee. The end of the month is also when the financing expires, as well as the agreement to sell the Sun Harvest and Henry's stores to Apollo.
The FTC filing also included the allegation that Wild Oats retaliated against former CEO Perry Odak after he testified that Whole Foods and Wild Oats compete only with each other instead of other supermarkets, an argument that counters Whole Foods' position.
"After receiving the transcript of Mr. Odak's testimony, the defendants (Whole Foods and Wild Oats) appear to have withheld certain payments due to Mr. Odak," the FTC said.
Wild Oats spokeswoman Sonja Tuitele said the allegation that payments to Odak were withheld is "just not true."
Wild Oats
OATS: Nasdaq
$14.87
-1 cent
Whole Foods
WFMI: Nasdaq
$41.48
-37 cents
What's next
A federal judge in Washington will rule this week on whether Whole Foods can proceed with its proposed purchase of Wild Oats. Both the FTC and Whole Foods have said they will seek a speedy appeal if they lose.
What wasn't supposed to be disclosed
The opening of a Whole Foods store can cut revenue 30 percent or more in nearby Wild Oats stores.
Whole Foods set "ground rules" to bar suppliers from selling directly to Wal-Mart. "It wants Wal-Mart to have to go through distributors because that raises Wal-Mart's costs," the document said.
Company documents labeled "Project Goldmine" predicted that buying Wild Oats and shutting down certain stores would increase revenue 85 percent to 90 percent at nearby Whole Foods stores.
The takeover will send as many as 80 percent to 90 percent of Wild Oats shoppers to Whole Foods stores, according to Whole Foods documents cited by the government. "As a result, they will unambiguously be worse off," because of increased prices, the FTC argued.
davisj@RockyMountainNews.com or 303-954-2514. The Associated Press contributed to this report.
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