Insomnia Log

This is what keeps me awake at night???

Who needs sleep? (well you’re never gonna get it)
Who needs sleep? (tell me what’s that for)
Who needs sleep? (be happy with what you’re getting,
There’s a guy who’s been awake since the second world war)

-- words and music by Steven Page & Ed Robertson

Location: Boulder, Colorado, United States

Everything you need to know about me can be found in my posts

Saturday, June 23, 2007

Wild Foods: Mixing Trust with Antitrust Leads to Total Annihilation

I can't believe what John Mackey, CEO of Whole Foods, said. I'm not the CEO of a multi-billion dollar company. Yet, my employer makes sure that I understand antitrust law well enough to know when to shut up, and what not to put into writing. Whole Foods is trying to buy its biggest rival, Boulder-based Wild Oats. And Mackey actually wrote in memos that the merger would eliminate competition and prevent a price war. Doesn't the man understand that while in the middle of an attempted merger all of these documents are discoverable and will be seen? He may have created and grown a hugely successful business, but he clearly needs to either hire some better lawyers or start listening to the ones he already has.

Full disclosure, not only do I shop at both stores, I also own stock in both companies. I have not offered my Wild Oats shares for sale to Whole Foods, but if the merger does go through I will have no choice. Also, the merger is likely to have a big local impact in Boulder -- in addition to the Whole Foods (already slated for expansion), there are three Wild Oats stores, plus the brand new Wild Oats corporate headquarters. Undoubtedly, at least one of those locations will close after the merger, reducing our shopping options.

Here's what I don't understand about this merger. Wild Oats shareholders have already tendered (as of a few days ago) about 58% of the outstanding shares of the company to Whole Foods. That's enough to make the merger happen, absent legal issues. Whole Foods is now under an injunction against acquiring any more shares, and injunction is in effect until July 31. They have recently extended the deadline to tender shares until July 20 -- but the company will be under injunction against proceeding with the merger past that date. Whatever will they do?

Unfortunately, although there may be some downsides to the planned merger, it is probably far enough along that it would have a huge negative impact on Wild Oats if the deal is killed. If Mackey can't convince the FTC that his anti-competitive comments were just meaningless bluster, it will probably be left to someone else to come in and pick up the pieces.

Anyone want to buy a health food chain cheap?

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Anonymous Gordon Weakliem said...

And then there's the recent news about Mackey posting anonymously on Yahoo! Finance boards. Discretion is not the man's middle name. As an investor, I'd be worried about Mackey getting in trouble under fair disclosure laws. I'd say that the guy is too much of an open book to be actually hiding something, but I don't know - he acts like he's running the corner liquor store, not a public company.

Fri Jul 13, 12:11:00 PM  
Blogger insomniac said...

I personally think his actions border on criminal and he should resign or be fired immediately. See my latest post on this topic.

Fri Jul 13, 11:07:00 PM  

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