Wild Oats, Incorporated
Wild Oats Markets, Inc. (Nasdaq: OATS), was a leading natural and organic foods retailer. The Company operated 110 natural foods stores in 24 states and British Columbia, Canada. The Company's markets included: Wild Oats Marketplace, Henry's Farmers Market, Sun Harvest and Capers Community Markets. Wild Oats was an operator of natural foods stores and farmers markets in North America. The stores offered dry grocery, meat, poultry, seafood, dairy, frozen, prepared foods, bakery, vitamins and supplements, health and body care, and household items (www.en.wikipedia.org/wiki/Wild_Oats_Markets). Wild Oats was acquired by now the nation’s largest natural foods grocer, Whole Foods (Nasdaq: WFMI). Based out of Austin, TX, Whole Foods has been the long-time rival of Wild Oats. Whole Foods paid $565 million in acquiring Wild Oats and also assumed the $106 million in debt that Wild Oats had outstanding. Problem Analysis:
While rivaling with Whole Foods stores in the years between 1995 and 2005, Wild Oats was struggling to return to the fast growth it once had. Wild Oats growth rate was a steady 6 percent annually, while Whole Foods great at 21 percent during the same time period. Perry Odak, who was Wild Oats Chief Executive Office since 2001, struggled to help the company recover from its problems that were caused by a string of store and market acquisitions throughout the years. What could have Wild Oats done differently for the company to not have caused them to go into a $106 million debt and eventually be bought out by its number one competitor?
In 1991 and 1992, Wild Oats opened 3 stores in Santa Fe and Albuquerque, New Mexico, and another in Colorado. The alternative was to just keep the stores that they had and concentrate on those. A good example to analyze is when Wild Oats acquired Alfalfa's in 1996. Pros-
i Growth to a corporation means stock options and share price climbs for the stock owners, therefore, as Wild Oats continues to keep opening other stores at a rapid pace, stockholders are happy that the company’s equity is growing. When Alfalfa’s was acquired in 1996, both companies had much in common. Their commitment to providing wholesome, natural foods was joined with their commitment to their employees and the community. Also, both stores had profit-sharing plans. Cons
i Wild Oats is growing too fast. Because of this, management is losing touch with its employees. When Alfalfa’s was acquired in 1996, both companies had much in common, but the two companies took pains to distinguish themselves, particularly in Boulder. Founder of Wild Oats, Michael Gilliland, explained about Wild Oats and Alfalfa’s, “They take the high end; we take the low end. We have lower prices, are more lowed key, and are not so inclined to gourmet items." Elizabeth Cook, wife of Gilliland, said "We're a hard-core natural foods store. They concentrate on food service. We concentrate on bulk and mainstream grocery" (http://www.fundinguniverse.com).
i Shares Offered: After the acquisition of Alfalfa's, Wild Oats concentrated on its next major goal, that of offering shares of the company on the public market. On October 23, 1996, the company achieved that goal, offering 1.69 million shares of stock on the NASDAQ. Speculation had been high that the stock would soar at the initial public offering (http://www.fundinguniverse.com). Cons
i Although Wild Oats had an offer price of $25 per share, the trading was low and the stock closed the first day at only $25.38. Brokers did not understand Wild Oats' philosophy. One broker said to the Rocky Mountain News, "I'm from Manhattan, and, believe me, health food is definitely few and far between. You walk out of any exchange at noon, and they are inhaling hot dogs, pizzas, and gyros." (http://www.fundinguniverse.com). Alternative 3:
"We believe strongly in...
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