Whole Foods to Buy Wild Oats

Whole Foods Market Inc., the largest U.S. natural-foods grocer has agreed to acquire its Colorado-based competitor, Wild Oats Markets Inc. for $565 million.

Whole Foods will pay $18.50 in cash for each share of Wild Oats, 18 percent higher than its closing price today. By acquiring Wild Oats, the former will be able to counter competition from Safeway Inc., Trader Joe's and other grocery stores selling organic and prepared food.

The proposed purchase by Whole Foods is the largest by the company and will be funded with $700 million in loans.

Assigning logic to the purchase, Chief Executive Officer John Mackey said "Wild Oats has improved their stores quite a bit in last few years, and we think we can help them improve even more. We can put jet propulsion under a lot of those stores in the next year or two."

Shares of Whole Foods rose $2.40, or 5.3 percent, to $48.10 at 6:33 p.m. in extended U.S. trading. On the other hand, Wild Oats shares jumped $2.71, or 17 percent, to $18.43.

As a part of its expansion plans, Whole Foods will add 110 stores in 24 states and Canada's westernmost province of British Columbia. Some Wild Oats stores will be closed and others that overlap with Whole Foods stores in development will be relocated.

Whole Foods had initially considered buying Wild Oats six years ago, but the discussions did not materialize.

Whole Foods Market was founded in 1980 as one small store in Austin, Texas. It is now the world's leading retailer of natural and organic foods, with 193 stores in North America and the United Kingdom.

Wild Oats was founded in 1987 with the purchase of Crystal Market, the only vegetarian natural foods store in Boulder, Colorado. In 1993 and 1994, Wild Oats was named one of the "500 Fastest-Growing Private Companies in America" by Inc. Magazine. As of now, the company operates in more than 110 stores in 25 states and Canada.