Bloomberg reports that the larger organic food retailer Whole Foods is buying smaller organic food retailer Wild Oats.
Whole Foods Market Inc., the largest U.S. natural-foods grocer, said it agreed to buy rival Wild Oats Markets Inc. for $565 million after reporting its first profit decline in five quarters.
Whole Foods will pay $18.50 in cash for each share of Boulder, Colorado-based Wild Oats, 18 percent higher than its closing price today. First-quarter net income fell 7.8 percent to $53.8 million, or 38 cents a share, Austin, Texas-based Whole Foods said today. Earnings missed analysts' estimates.
Buying Wild Oats will help counter slowing growth at Whole Foods, which faced competition from Safeway Inc., Trader Joe's and other grocery stores selling organic and prepared food. First-quarter sales at Whole Foods stores open at least a year rose 7 percent, down from 13 percent a year earlier.
"Whole Foods had won the size game and was able to call the shots," said Matt Patsky, portfolio manager at Boston-based Winslow Management Co. which overseas $350 million, including Whole Foods shares.
Wild Oats posted a loss in two of the past five years and its sales climbed 26 percent over the period to $1.12 billion, while Whole Foods doubled profit and sales.
Here are a few other details:
Whole Foods will add 110 stores in 24 states and Canada and close a few Wild Oats stores that overlap with Whole Foods stores.
Whole Foods says the integration will take them two years.
The deal could help Whole Foods cut costs as they face rising competition from regular grocery stores adding organic food aisles and sections.
Another article on the merger can be found here in the Denver Post. Wild Oats is based in Denver.
Bloomberg 