John Mackey, chairman, CEO, and co-founder of Texas-based Whole Foods Market, sat at his desk, rubbing his eyes. It was April 23, 2008, over a year since Whole Foods announced its intention to acquire Colorado-based Wild Oats Markets, its closest competitor, in February 2007, and the acquisition was still in legal turmoil. After defeating an antitrust lawsuit filed by the U.S. Federal Trade Commission (FTC), Whole Foods had moved forward with its acquisition of Wild Oats in August 2007. But in October 2007, Mackey received word that the FTC had filed an appeal with the U.S. Court of Appeals for the D.C. Circuit; however, nothing had been decided. Despite the challenging regulatory environment, Mackey and his management team had already begun integrating Wild Oats into Whole Foods. Of the initial 109 Wild Oats stores, Whole Foods sold 35, closed 12, and converted one-third of the remaining stores into Whole Foods outlets.
Mackey had no idea how Whole Foods would “undo” the deal if the court did not rule in its favor. Yet, even if Whole Foods won the court battle, the mounting legal fees and potential distraction from operations was sure to have a negative impact on the benefits expected from the $565 million deal. Now, as Mackey thought back to last February, he was uneasy about the decision he and his management team had made to purchase Wild Oats. He was also unsure how to react to the possible implications of the court’s impending decision.
1. Did this merger make sense for Whole Foods? Why or why not?
2. Do you think that the FTC’s claims against Whole Foods were valid? Why or why not?
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