While neither company is commenting on the rumor, speculation was growing yesterday that Kroger Co. is interested in buying Wild Oats, the natural food grocery chain.
The cost of such an acquisition, according to these reports, would be in the neighborhood of a half-billion dollars.
The rumors caused Wild Oats shares to increase 11 percent in price.
There were mixed reactions on the street to such a move.
According to Dow Jones, Delafield Hambrecht analyst Jeff Tryka embraced the deal as making sense for Kroger because it would allow the company to make inroads into the natural foods arena.
However, Andrew Wolf, an analyst at BB&T Capital Markets, told Dow Jones that Wild Oats' stores are "mediocre at best" and, at an average of 26,000-sq. ft., too small to generate the kinds of volume that Kroger would need.
The cost of such an acquisition, according to these reports, would be in the neighborhood of a half-billion dollars.
The rumors caused Wild Oats shares to increase 11 percent in price.
There were mixed reactions on the street to such a move.
According to Dow Jones, Delafield Hambrecht analyst Jeff Tryka embraced the deal as making sense for Kroger because it would allow the company to make inroads into the natural foods arena.
However, Andrew Wolf, an analyst at BB&T Capital Markets, told Dow Jones that Wild Oats' stores are "mediocre at best" and, at an average of 26,000-sq. ft., too small to generate the kinds of volume that Kroger would need.
- KC's View:
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Our position for some time has been that both Whole Foods and Wild Oats are likely to be acquired by one of the country's major food retailers. Ahold was always rumored to be a top contender for one of them, though that speculation doesn’t have a lot of currency at the moment because of the Dutch retailer's financial troubles. And Safeway would seem to be at the point these days of divesting, not acquiring companies; plus, its preferred policy of centralization wouldn't play well with a natural foods format.
That leaves Albertsons and Kroger. And, of course, Wal-Mart. On first glance, you’d think that Wal-Mart would be the least likely of the three to buy a natural foods chain; it doesn't fit into the company's existing suite of formats, and it doesn't project a low price image. It would seem, on the face of it, that it is likely that Kroger might acquire one and Albertsons the other.
Except that conventional wisdom rarely is what it appears to be.
Would anyone be shocked if, say, Wal-Mart announced next week that it was acquiring Wild Oats as a natural foods adjunct to its Neighborhood Market chain?
Maybe it isn’t likely. But it sure would turn that segment of the industry on its ear. And the mere possibility of that happening could place pressure on companies like Kroger to make a move first.
We've learned to expect the unexpected.
