Feb 22 2007
Hip(pie) Acquisition
Two of my favorite grocers announced today that they will become one. Whole Foods Markets (NASDAQ: WFMI) has is acquiring Wild Oats Markets (NASDAQ: OATS) for about $700 million including debt. The stocks for both companies have been on a tear since the initial announcement, the deal is expected to close in April. Life has [...]
Two of my favorite grocers announced today that they will become one. Whole Foods Markets (NASDAQ: WFMI) has is acquiring Wild Oats Markets (NASDAQ: OATS) for about $700 million including debt. The stocks for both companies have been on a tear since the initial announcement, the deal is expected to close in April. Life has been tough lately for natural food grocers like these two, faced with increasing competition from the likes of Trader Joe’s, conventional supermarket chains like Safeway and Kroger, and even Walmart. This is an interesting market consolidation, it gives Whole Foods a better presence in the South-East, Rocky Mountain Area and the Pacific Northwest. Whole Foods also has an impressive track record for the acquisition & turnaround of smaller non-profitable natural foods retailers, though Wild Oats will be it’s largest acquisition to date. Another issue, which I believe is significant, is the large duplication of overhead and management. Store closures and brand consolidation (Wild Oats operates under Wild Oats Marketplace, Henry’s Farmers Market, Sun Harvest, and Capers Community in 24 states & Canada) are bound to happen.
From a consumer standpoint, I would be interested to see what brands would be retained on the shelf from Wild Oats and whether the shopping experience would be altered. From an investor standpoint, would earnings for Wild Oats stores benefit from Whole Foods management, and how will Whole Foods deal with the acquisition of debt and several under-performing stores in markets they don’t have much experience in? If I may speculate here for an instant, based on Whole Foods track record, I’m feeling very positive about the whole situation. There are large pitfalls to navigate through, but in the end I believe that with ever increasing demand for natural & organic food, diet crazes, international cuisines and commercial farmer’s markets (for the lack of a better term), Whole Foods, under its current CEO John Mackey, will prevail.
Well it’s time to go grocery shopping. ta-ta.