Whole Foods Market Inc. (Austin, Texas) announced plans to transfer all 35 Henry's and Sun Harvest store locations to a wholly owned subsidiary of Smart & Final Inc., a Commerce, Calif.-based food retailer, once the Whole Foods merger with Wild Oats Markets Inc. (Boulder, Colo.) is approved.
Henry’s and Sun Harvest are subsidiaries of Wild Oats.
“We have determined that these stores do not fit into Whole Foods Market's long-term real estate and brand strategy,” said Whole Foods ceo John Mackey. “It is important to us to ensure a smooth transition and to be open about our plans because of the employees and loyal shoppers at these locations. We believe both will be well served by Smart and Final's business focus.”
Smart & Final is privately held and controlled by private equity firm Apollo Management L.P., operating 255 non-membership warehouse stores under the Smart & Final and Smart Foodservice Cash & Carry banners in Washington, Oregon, Idaho, California, Arizona, Nevada and northern Mexico. The Henry's and Sun Harvest stores are located in California and Texas.
The U.S. Federal Trade Commission's has applied for an injunction to block the proposed merger, which was announced in February. The U.S. District Court for the District of Columbia has scheduled a preliminary injunction hearing to begin on July 31, 2007 and to conclude on August 1, to decide whether to approve the transaction.
According to the FTC, Mackey recently told the Whole Foods board via e-mail hat if the merger were approved, the company would “eliminate forever” the possibility that anyone else could create a nationwide competitor in the natural and organic grocery business. He is also alleged to have said that buying Wild Oats would let Whole Foods “avoid nasty price wars” in several cities where the two compete. FTC lawyers reported the comments in a request this month for a temporary injunction to block Whole Foods from buying Wild Oats. A federal judge approved the request.
In a 14,000-word blog posting on the company’s web site, Mackey is also said to have accused regulators of bullying, arrogance and deciding to oppose the deal before starting the investigation.
The posting, entitled “Whole Foods, Wild Oats and the FTC,” has been added to Mackey’s blog on the Whole Foods web site, dedicated to updates and information regarding the proposed merger. “My blog posting provides a detailed look into Whole Foods Market's decision-making process regarding the merger, as well as our company's experience interacting with the FTC staff assigned to this merger,” Mackey wrote. “I provide explanations of how I think the FTC, to date, has neglected to do its homework appropriately, especially given the statements made regarding prices, quality, and service levels in its complaint. I also provide a glimpse into the bullying tactics used against Whole Foods Market by this taxpayer-funded agency. Finally, I provide answers in my FAQ section to many of the questions that various team members have fielded from both the media and company stakeholders. As previously announced, we set an intention as a company to be as transparent as possible throughout this legal process, and this blog entry is my first detailed effort at transparency.”
FTC lawyers reported Mackey’s comments in a request this month for a temporary injunction to block Whole Foods from buying Wild Oats. A federal judge approved the request. Whole Foods has been forced to extend its tender offer for Wild Oats through July 20. Regulators say Whole Foods and Wild Oats are leading players in natural and organic food, but Whole Foods argues that the companies are a small part of a much larger industry because big grocery chains also sell organic food. Government officials had publicly charged that combining the two natural-food chains could lead to higher prices.