Kroger to Buy Wild Oats, Say Rumors

NEW YORK -- Shares of Wild Oats Markets Inc. rose Tuesday amid speculation that Cincinnati-based Kroger Co. might make an offer for the natural foods grocery chain.

Although Wild Oats representative Kristi Estes wouldn't comment on the rumors, she did say that the Boulder, Colo. company hasn't made any past announcements that it's for sale. A spokesman for Cincinnati-based Kroger also wouldn't comment on the speculation.

Although the rumors weren't specific about a price tag, one analyst told Dow Jones Newswires that he heard the deal valued Wild Oats as richly as $17 a share.

As of May 24, Kroger had $156.3 million in cash that it could put toward acquisitions. The company also has 751.4 million shares outstanding. Buying Wild Oats and its 29.9 million shares outstanding at $17 a share would cost Kroger approximately $508.3 million.

Delafield Hambrecht analyst Jeff Tryka said it would make sense for Kroger to expand into the growing natural food arena by purchasing Wild Oats. "Organic and natural grocery retail has been much faster-growing than traditional" grocery retail, he said.

Andrew Wolf, an analyst at BB&T Corp.'s BB&T Capital Markets, agreed that Kroger could find it "attractive" to enter the organic foods market; however, he doesn't believe buying Wild Oats is the way to do it. Wild Oats' stores are "mediocre at best" and too small to generate the sales needed for modern food retailing, Wolf said. Wild Oats aims to have stores around 26,000 square feet, Wolf said, while its competitor's stores, Whole Foods Market Inc., tend to be 44,000 square feet. And buying Wild Oats for $17 a share "is a rich valuation," he added.

Wolf, who doesn't own shares of Wild Oats, rates the company's stock at a "hold." Neither BB&T nor Delafield Hambrecht have a banking relationship with the company. Delafield analyst Tryka also doesn't own shares of Wild Oats.