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Wal-Mart, overwhelmed by competitive pressures from Whole Foods, files for bankruptcy

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June 05, 2007 – Comments (0)

OK, not really.

The news today is that the FTC is filing a lawsuit opposing the merger of Whole Foods and Wild Oats: http://news.morningstar.com/news/ViewNews.asp?article=/DJ/200706051433DOWJONESDJONLINE000621_univ.xml&pgid=pfsnapshotbt

WFMI's shares are down 3%. I find the FTC's decision to be bizarre.

As I said previously, this is a small grocer acquiring a tiny one. Their market share in the grocery industry would be around 1%. I believe M*'s video report said that if you considered the organic grocery market, their combined market share would actually be only 20%. Instead of Wal-Mart going out of business from Whole Foods, it is Whole Foods that is under some competitive pressure as Wal-Mart and other large grocers increase their selections of organic products. I think WFMI can overcome the challenges; it is turning into a "third place" between home and work, like Starbucks, and it is still very profitable.

 I don't think that a failed acquisition of OATS would be fatal to Whole Foods - it could be a bigger problem for OATS, which is less profitable. Both parties intend to challenge the lawsuit. I'm not a lawyer, so I have no idea how this will pan out. I wish them well, and hope the merger is allowed to proceed. However, I have no idea what the FTC is thinking. They are wasting time and money for themselves, and shareholders of WFMI and OATS. Preventing the merger will not protect the interest of the public. Surely they have better things to do?

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