What's next for Whole Foods, Wild Oats?

Howard Davidowitz, chairman of the retail consulting and investment banking firm Davidowitz & Associates, thinks Whole Foods can continue to grow even without the merger. But, he cautions, “I think some steam will be taken out of the possibilities.”

Davidowitz still believes Whole Foods represents the “gold standard” for organic and natural foods grocers, but he sees giants like Safeway increasingly encroaching on the turf. Even megaretailer Wal-Mart has expanded its organic offerings to capitalize on the trend toward more natural food.

Mackey himself, whose identity has been closely tied to the company, could prove a liability if the merger fails, analysts say.

Mackey is the co-founder and chairman of the chain and is credited for essentially inventing a niche market in high-end natural grocery shopping, Davidowitz said. But, he said, the CEO’s comments, as disclosed in the FTC documents, have “tarnished Whole Foods and put the future of Mackey possibly in doubt.”

Whole Foods did not return several calls and e-mails seeking comment. The company has in the past vowed to fight the FTC.

There is also speculation that another mainstream grocery company could swoop in and buy  Wild Oats if the current deal falls through, providing a new competitive threat to Whole Foods. That is one of the concerns Mackey himself has fretted about, according to the FTC documents.

Wild Oats spokeswoman Sonja Tuitele said the company wasn’t looking to sell when Whole Foods approached its management with the deal. She said Wild Oats would still like the Whole Foods acquisition to go ahead, but if it falls through interim Chief Executive Gregory Mays plans to continue running the company on its own.

“It’s not like if this doesn’t go through he’s going to run out and try to find another buyer,” Tuitele said.

Still, it would leave the company in flux. Mays, who also serves as the company’s chairman, took on interim CEO duties in October, after the company could not come to an employment agreement with its previous CEO, Perry Odak. Tuitele said the company has continued with some of its revitalization plans since the merger was announced, and has been pleased with its progress. But other plans, particularly for growth, are on hold pending the outcome.

Meanwhile, shareholders have been on a bit of a wild ride. Shares in Wild Oats rose from $15 per share before the acquisition was announced to hover just below the $18.50 per share asking price soon after. But they have fallen again more recently and are currently trading at around $16.50.

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