Whole Foods Would Sell Henry's and Sun Harvest Stores, Depot to Smart & Final

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Whole Foods Would Sell Henry's and Sun Harvest Stores, Depot to Smart & Final

AUSTIN, Texas -- Whole Foods Market Inc. here said it plans to sell all 35 of Wild Oats' Henry's and Sun Harvest stores, along with a Riverside, Calif. distribution center, to Los Angeles-based Smart & Final Inc.-if and when it gets control of the stores as a result of its planned $565 million purchase of Wild Oats, currently blocked by a lawsuit filed by the U.S. Federal Trade Commission.

"We have determined that these stores do not fit into Whole Foods Market's long-term real estate and brand strategy," said Whole Foods Market CEO John Mackey. "It is important to us to ensure a smooth transition and to be open about our plans because of the employees and loyal shoppers at these locations. We believe both will be well served by Smart and Final's business focus."

Smart & Final is privately held and controlled by Apollo Management, L.P., one of the largest private equity firms in the world. It operates 255 non-membership warehouse stores under the Smart & Final and Smart Foodservice Cash & Carry banners, which sell food and foodservice products to household and small business customers in Washington, Oregon, Idaho, California, Arizona, Nevada, and Northern Mexico.

"We believe that the Henry's and Sun Harvest formats have the potential for significant new store growth and we intend to invest in the Henry's and Sun Harvest store base with a goal of opening a significant number of new stores over the next two to three years," said George Golleher, Chairman and Chief Executive Officer of Smart & Final. "We believe there are enhancements to the business that will serve to further accelerate comparable store sales growth."

Apollo Management has had a hand in a number of other retail operations in the past, including Ralphs Grocery Company, Dominick's Supermarkets, Claire's Stores, Linens 'n Things, General Nutrition Centers, Zale Corporation, Rent-A-Center, and Proffitt's Department Stores.

The proposed unloading of the Wild Oats units to Apollo raises the possibility that Apollo Management might emerge as a contender for Wild Oats if the Whole Foods deal is ultimately killed. In a court filing in the FTC's lawsuit made public yesterday, Apollo said it previously explored a potential purchase of all of Wild Oats, according to Dow Jones.

The news about the planned divestiture of Henry's and Sun Harvest units comes in the midst of a war of words, via released court documents and blogs, between FTC and Mackey over the potential impact of the Whole FoodsWild Oats merger on competition in the natural foods retailing space.