AUSTIN, Texas — Whole Foods Market has agreed to put up for sale 32 stores — most of which are closed — along with the Wild Oats trademarks to settle its antitrust case with the Federal Trade Commission.
The locations include 19 shuttered Wild Oats sites, 10 of which had been closed by Wild Oats before the two chains merged in 2007, and nine that were closed by Whole Foods following the merger. The 13 operating stores encompass 12 Wild Oats locations and one Whole Foods store.
The sale process is being handled by The Food Partners, Washington, D.C., which was named as the trustee for that purpose. It has six months to market the properties.
The settlement can be seen as a “win-win” solution benefiting both the FTC and Whole Foods, according to Peter Love, an antitrust attorney with Jones Day, Washington.
“This is one of those situations where both sides get to declare victory,” he told SN. “For Whole Foods, the cost of litigating these things is considerable, and I think at this point it made sense for them to shed a few stores — my guess is that these are not their best stores, so the relative pain is not that great — and they get the benefit of being able to put this behind them.”
He noted that the FTC also “gets to claim victory” by forcing the divestitures.
“They get to preserve that precedent that was set at the Court of Appeals,” he said, referring to the fact that a three-judge panel last year ruled that a circuit judge erred in not issuing a preliminary injunction to halt the merger. “[The FTC feels] that makes clear that it has a very low burden when it wants a preliminary injunction to stop a merger — I think the FTC thinks there's a lot of value to having that opinion on the books.”
He noted that the FTC also “believes it was right” in seeking to block the merger, based on the presumption that Whole Foods and Wild Oats operate in a unique class of retailers it called “premium natural and organic.” The FTC had identified 29 markets where it said Whole Foods and Wild Oats had potential antitrust violations.
Mike Gilliland, who as the founder of Wild Oats is highly familiar with many of the locations, said he thinks it might be difficult for Whole Foods to sell them.
“My personal opinion is that a lot of those stores that were operating might have been closed in the not-too-distant future,” he told SN last week.
Gilliland, who is now the chief executive officer of Sunflower Farmers Market, Boulder, Colo., said his company probably would not be interested in looking at more than one or two of the locations.
“Most of them are either overlapping with us or are just closed leases, and you don't really need to make a deal with Whole Foods to do those,” he said. “I don't know why anyone would be interested.”
Some observers have speculated that Gilliland could be interested in acquiring the Wild Oats name, however, especially since he is intent on expanding but can only use the Sunflower banner in five states because of an agreement with Supervalu, which still owns the Sunflower name. In Texas, where Gilliland's Sunflower chain recently began operating, he has opened three stores under the Newflower Farmers Market banner.
Love of Jones Day agreed that Whole Foods has a difficult road ahead in marketing the stores.
“In my experience in handling these divestitures, you can never get full value when you are handling it by consent decree,” he said. “It's sort of a distressed sale.”
In addition, there may be a limited number of potential buyers, given that the FTC will “want to see them operated as organic supermarkets that compete in the same product space that Whole Foods is in,” Love explained.
The original acquisition, for $565 million, was finalized in August 2007 and included 109 Wild Oats locations. Thirty-five of those — under the Henry's and Sun Harvest banners — were sold immediately to Los Angles-based Smart & Final.
The closed sites for sale include six in Arizona, three in Nevada, two each in Colorado and Oregon, and one each in Florida, Kentucky, Maine, Missouri, Nebraska and Utah. The operating stores encompass five in Colorado, two in Arizona and one each in Connecticut, Missouri, New Mexico, Nevada, Oregon and Utah.
