Whole Oats? Whole Foods to Buy Wild Oats

AUSTIN, Texas—Whole Foods Market Inc. (NASDAQ:WFMI) signed a definitive agreement to purchase all outstanding shares of Wild Oats Market Inc. (NASDAQ:OATS) for $18.50 per share, a deal worth about $565 million, based on fully diluted shares. In addition to this 23-percent premium (over OATS shares’ one-month average closing price), Whole Foods will also assume about $106 million in existing Wild Oats debt. Included in the OATS shares will be the 18-percent stake held by Ron Burkle’s Yucaipa Cos, which agreed to the sale. The transaction will be funded by senior term loans to the tune of $700 million, the expected net enterprise value of the transaction.

“Wild Oats Markets and Whole Foods Markets have both had a large and positive impact on the natural and organic foods movement throughout the United States, helping lead the industry to nationwide acceptance and to becoming one of the fastest growing segments in food retailing today,” said John Mackey, chairman, chief executive officer (CEO) and co-founder of Whole Foods. Since its founding in 1980, Whole Foods has acquired several other super-natural chains, including Fresh Fields, Bread & Circus and Mrs. Gooch’s. Wild Oats, which started operations in Boulder, Colo., in 1987, has had more modest growth, with acquisitions of smaller chains such as Sun Harvest and Capers.

All 11 of Whole Foods’ operating region will gain stores, and the company also will gain new markets. Three smaller Whole Foods regions— Northwest, Rocky Mountain and Florida—will gain critical mass, according to Mackey. In addition to Wild Oats’ $1.2 billion annual sales, Whole Foods expects the merged company will realize several operating synergies, including reduced general and administrative costs, improved purchasing power, better use of support facilities and new team member talent.

The deal is expected to close in April.