This Bloomberg article on Austin-based Whole Foods’ proposed acquisition of Wild Oats Markets confirms that officials at the Federal Trade Commission do not have enough to do:
U.S. antitrust regulators plan to file suit to block the proposed merger between Whole Foods Market Inc. and Wild Oats Markets Inc., the largest and second- largest natural-foods grocers. [. . .]
The agency is concerned that the combined company will control too much of the U.S. natural-foods market and increase prices. . .
“If Whole Foods is allowed to devour Wild Oats, it will mean higher prices, reduced quality, and fewer choices for consumers,” Jeffrey Schmidt, director of the FTC’s Bureau of Competition, said in a statement. “That is a deal consumers should not be required to swallow.”
The commission voted 5-to-0 to authorize staff to seek a temporary restraining order.
I mean, what on earth are these people at the FTC thinking? Since they haven’t moved to block a retail merger in a decade that it’s time to try and block one? What else could explain attempting to block a relatively small $600 million deal that would result in a combined company with just over 300 stores? Besides, it’s not as if Whole Foods is doing all that great, anyway.
The FTC seems to be saying that Whole Foods and Wild Oats are in a different market than conventional grocery chains. But that’s just plain silly. Not only will customers move to non-organic products if Whole Foods and Wild Oats price an organic alternative too high, virtually every retail grocery operation is now offering their own organic section in their stores. For goodness sakes, even Wal-Mart is offering an organic product section in many of its grocery stores these days.
Dana Cimilluca over at the WSJ DealJournal speculates that the FTC action is a pure political move to chill the overheated merger market. Maybe so, but that’s sure a petty reason to deny a relatively small group of shareholders an opportunity to realize some increasingly rare equity upside in the brutally competitive grocery business.
