Whole Foods could close its purchase of Wild Oats as early as Monday, retiring the homegrown brand that started 20 years ago as a health-foods market in Boulder's University Hill neighborhood.

A federal judge on Thursday said Whole Foods can proceed with its $671 million purchase, rejecting the government's argument that the merged company would corner the natural- and organic- foods market.

U.S. District Judge Paul Friedman in Washington filed his 93-page ruling under seal because it contained corporate secrets.

The Federal Trade Commission could appeal the ruling and ask the court for an emergency order to delay the transaction, pending the appeal. Blocking the merger, however, might be a long shot, legal experts said.

The FTC argued that Whole Foods and Wild Oats compete in a distinct market for premium natural and organic foods, and that the deal would result in higher prices and diminished quality for consumers. Whole Foods countered that it competes in the broader supermarket industry, where everyone from Wal-Mart to Kroger is bulking up on organic offerings.

"From the beginning, the FTC was defining the market in a very narrow way," said Michael Krestell, an analyst with M Partners in Toronto. "We've always pointed to the existing competition from the conventional grocers that's increasing all of the time, not to mention the thousands of independents."

FTC Competition Director Jeffrey Schmidt called the decision a "loss" for both consumers and competition. The agency said it's reviewing its options on whether to seek an emergency stay.

Whole Foods, which has 197 stores in the U.S., Canada and the U.K., would add 109 locations in 23 states by buying Wild Oats. Whole Foods already announced plans to sell off 35 of those Wild Oats stores in California and Texas that operate under the Henry's and Sun Harvest names.

Wild Oats CEO Greg Mays said the merger "will mean significant career opportunities for our store associates, capital investment in our stores to enhance the shopping experience for our customers and value-creation for our shareholders."

A filing by the FTC this week inadvertently disclosed that Whole Foods plans to close 30 Wild Oats stores. Austin, Texas-based Whole Foods said it hasn't made any decisions on which, if any, Wild Oats stores it will close and won't know until it can see individual stores' financial statements.

The possible closure of those stores isn't surprising, said Stan Slater, a professor at Colorado State University's College of Business. Wild Oats shuttered 11 stores last year, including one in Fort Collins, and ceased development on two others. Last year it reported a net loss of $16.6 million on sales of $1.2 billion. By comparison, Whole Foods has doubled its sales in the past five years to $5.6 billion in 2006.

"One of the issues the FTC raised was if both Whole Foods and Wild Oats remained as competitors, they would both continue to expand and offer more and more choices for customers," Slater said. "Well, it didn't take a merger for Wild Oats to not be able to compete in Fort Collins, and they're in no position to expand."

Whole Foods agreed to buy Wild Oats in February for $18.50 a share plus the assumption of $106 million in debt.

The merger gained new drama in June when the FTC announced it was suing to block the deal.

The FTC disclosed that Whole Foods founder and CEO John Mackey told the board in an e-mail that purchasing Wild Oats would help the company avoid "nasty price wars" in markets including Boulder, where Wild Oats was planning to open a new flagship store near an existing Whole Foods store.

Mackey blasted back with a 14,000-word posting on his company blog. Within days, the FTC revealed that Mackey posted messages to online stock forums for a period lasting from 1999 to 2006, often denigrating rivals. Among postings made under the alias "rahodeb" was the assertion that "I knew (Wild) OATS was going to eventually crash (and I made quite a bit of money shorting them) because I knew . . . that Whole Foods would crush them in head-to-head competition, which is exactly what has happened."

The U.S. Securities and Exchange Commission initiated an informal inquiry into the postings, and the Whole Foods board launched an internal inquiry into the statements.

Mackey founded the company in 1980 and turned it into the nation's biggest premium natural- foods grocery. Now that Whole Foods is about to close its biggest-ever purchase, the board might be considering whether he's the best leader as the company goes into increasingly fierce competition with conventional grocery stores like Kroger and Safeway, said John Holcomb, an associate professor with the Daniels College of Business at the University of Denver.

"They might also decide Whole Foods needs other voices, particularly since he said so many nasty things about Oats and now it's let's all join hands and sing Kumbaya," Holcomb said. "I think the board has some really interesting challenges ahead of it."

Whole Foods has said it will guarantee that no Wild Oats store members will be laid off as a result of the merger, although redundant positions in the corporate offices will be eliminated.

Wild Oats was founded in 1987 by Michael Gilliland and his wife, Elizabeth Cook, who purchased a vegetarian food store in Boulder.

In 1991, they opened their first supermarket-size store in Santa Fe and began buying smaller stores, including the 1996 purchase of Alfalfa's Market.

Gilliland left in 2001 and went on to found Sunflower Farmers Market.

What's next for:

Customers

Whole Foods plans to close 30 or more Wild Oats stores, according to a court filing by the Federal Trade Commission. Whole Foods may decide to close some Wild Oats stores that are near its own stores. The Wild Oats stores that stay open likely will be re-branded as Whole Foods stores and stocked with Whole Foods products, such as its own private-label brands. Whether customers will pay more or less at the stores remains to be seen.

Employees

Whole Foods already has guaranteed that no Wild Oats store team member will be laid off as a result of the merger. Wild Oats' Boulder corporate employees don't have the same promise. "We will offer as many opportunities to corporate employees, but we intend to eliminate the redundant jobs," Whole Foods said earlier this year.

Grocers

Whole Foods and Wild Oats have agreed not to close the deal until after 10 a.m. MDT Monday. Unless the FTC gets an emergency stay from an appeals court, the merger can then take place at any time.

Suppliers

Whole Foods says that because it's not as big as rivals like Kroger and Safeway, "We are not in a position to limit the marketplace of our vendors." After selling off the farmers market stores and closing some redundant stores, Whole Foods expects only about $700 million in sales from Wild Oats to remain - or about 11 percent of Whole Foods' current sales.

Shareholders

The terms of the $18.50-per- share cash offer for Wild Oats stock owners hasn't changed since Whole Foods made its offer in February. Wild Oats CEO Greg Mays received 30,000 restricted shares the day after the announcement as an inducement to stay, giving him a total of 59,035 stock options worth $1.1 million.

Whole Foods

WFMI: Nasdaq

$41.17

-33 cents

Wild Oats

OATS: Nasdaq

$15.21

+21 cents

davisj@RockyMountainNews.com or 303-954-2514

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