WHOLE FOODS TO BUY NATURE'S HEARTLAND

MICHAEL HARRISON

AUSTIN, Texas -- Whole Foods Market here said last week it has agreed to acquire the four-unit Nature's Heartland chain in the Boston area for approximately $25 million in cash.

John Mackey, chairman and chief executive officer of Whole Foods, said the proposed acquisition solidifies "our position as the area's leading natural- and organic-foods supermarket."

"It's a good move for [Whole Foods]," Sandy Raju, an analyst with Merrill Lynch, New York, told SN. "It's their most productive market in terms of sales per square foot," she added, estimating that figure at $670.

"It gives them a commanding presence in that market," said analyst Alan Hickock of U.S. Bankcorp Piper Jaffray, Minneapolis.

Hickock also said the move "is not unexpected" because "they have the goal of being a big company by developing new stores and acquiring existing stores. This is business as usual for this company."

Heartland, with stores that range in size from 20,000 to 40,000 square feet, competes with Whole Foods' six Bread & Circus stores in the area. The acquisition would give the company 92 stores in 19 states and would distance it further from the nation's second-largest natural-foods supermarket chain -- Boulder, Colo.-based Wild Oats Markets.

Wild Oats, recently linked with Whole Foods in a merger rumor, operates 67 stores in 11 states and Canada (three units). Hickock said that rumor has no validity. "They're getting to be a big company, too," he said of Wild Oats.

"They're not going to be shark bait for Whole Foods."

Both analysts said they expect Whole Foods to keep growing through acquisitions. However, neither could predict in what geographic region that next move may occur.

Leo Kahn, Heartland's chief executive officer, opened the privately held company's first store in Bedford, Mass., in 1996. Three more openings followed over the next two years. Kahn said the four stores have a combined annual volume of approximately $50 million.

"They're a good outfit," Kahn said of Whole Foods. "It's good potential for anyone who stays," he added, referring to Nature's Heartland's work force of approximately 500 employees. Kahn, 82, said he plans to retire.