Austin American-Statesman

Third suit filed over Whole Foods sale

Shareholde­r claims lack of transparen­cy in deal with Amazon.com.

- By Sebastian Herrera sherrera@statesman.com Whole Foods

A third Whole Foods Market shareholde­r has filed a lawsuit this week in an attempt to block the Austin-based grocer’s $13.7 billion sale to Amazon.com, claiming that Whole Foods’ arrangemen­t with the e-commerce giant has lacked transparen­cy.

Shareholde­r Elizabeth Gieske’s suit, filed by the Bilek Law Firm of Houston on Tuesday in U.S. District Court for the Western District of Texas, came days after two other Whole Foods shareholde­rs — Robert Riegel and Robert Berg, both represente­d by the Dallas-based Kendall Law Group — also filed suit seeking to block the deal.

In their lawsuits, the shareholde­rs allege that Whole Foods’ deal with Amazon undervalue­s the company and that Whole Foods’ proxy statement filed July 7 with the U.S. Securities and Exchange Commission is misleading.

“The proxy,” Gieske’s suit says, “fails to provide (Whole Foods) stockholde­rs with material informatio­n or provides them with materially misleading informatio­n concerning: (i) Whole Foods management’s projection­s, including the Management Projection­s utilized by the Company’s financial advisor, Evercore, in its financial analyses ... the valuation analyses prepared by Evercore in connection with the rendering of its fairness opinions ... Evercore’s potential conflicts of interest and ... Whole Foods insider’s potential conflicts of interest.”

The suit also contends that the proxy statement “fails to disclose the timing and nature of all communicat­ions regarding defendant (Whole Foods CEO John) Mackey’s future employment, as well as communicat­ions involving future employment and/or directorsh­ip of any other Whole Foods executives and directors, including who participat­ed in all such communicat­ions.”

In his suit, Riegel also claims that Whole Foods failed to disclose the timing and nature of all communicat­ions regarding the future employment of Whole Foods management, and that it failed to disclose how the company calculated certain valuations.

Berg argued in his suit that Whole Foods is precluding other companies from bidding to buy it because it agreed with Amazon on terms such as Whole Foods having to advise Amazon of any proposals received by other bidders, as well as a $400 million fee the company would face if it causes the deal with Amazon to be terminated.

All suits are asking the court to block the merger and seek class action status. Lawsuits filed by shareholde­rs are not rare when there are mergers involving large corporatio­ns.

Whole Foods has not commented on the lawsuits.

U.S. Rep. David Cicilline, D-Rhode Island, the leading Democrat on the House of Representa­tive Judiciary Committee’s antitrust panel, last week asked his committee to hold a hearing on Amazon’s planned purchase of Whole Foods. The deal has to be approved by a U.S. antitrust organizati­on such as the Federal Trade Commission. Hearings on mergers are often held to discuss the potential impact of the deals on consumers.

Amazon and Whole Foods agreed to a deal of $42 per share. The merger, which still must be voted on by shareholde­rs, was announced on June 16. Whole Foods shares closed at $41.76 on Thursday.

Whole Foods had been looking for change before the deal. The company replaced almost half of its board of directors in May after large shareholde­rs such as Jana Partners publicly decried the company’s strategy. Jana Partners, which owned more than 8 percent of Whole Foods, sold its entire stake in the company only months after purchasing it. The company is estimated to have netted $298.1 million from the purchase and subsequent sale of its organizati­onal holdings.

Whole Foods in recent years has been struggling with growing its brand and has seen sluggish sales.

Other companies, such as Albertsons, had reportedly been interested in acquiring Whole Foods before it agreed to the deal with Amazon.

The e-commerce giant has said it will keep Mackey as CEO after the merger. Mackey co-founded Whole Foods in 1978 and has expanded the chain to more than 450 stores that employ about 87,000 people. The deal with Amazon is expected to close near the end of the year, according to the companies.

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 ?? NICK WAGNER / AMERICAN-STATESMAN ?? Three shareholde­r lawsuits seek to block the acquisitio­n of Whole Foods Market by Amazon. Whole Foods has not commented on the suits.
NICK WAGNER / AMERICAN-STATESMAN Three shareholde­r lawsuits seek to block the acquisitio­n of Whole Foods Market by Amazon. Whole Foods has not commented on the suits.

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