Moody's may downgrade Whole Foods

Moody's Investors Service said it placed Whole Foods Market Inc.'s Ba2 subordinated debt, Ba1 issuer and Baa3 corporate family ratings under review for possible downgrade following the company's announcement of its plan to make a debt-financed acquisition of Wild Oats Markets, Inc. in a cash tender offer of $18.50 per share, or approximately $565 million, and to assume Wild Oats' existing net debt totaling approximately $106 million.

Whole Foods plans to fund the transaction with a new $700 million five-year bank term loan. The transaction is expected to close in April.

The agency said its review will focus on the integration plan for Wild Oats, including the likelihood and timing of anticipated synergies; Whole Foods' plans to boost sales and profit margins at Wild Oats after the acquisition; the expected capital expenditure program; and post-transaction financial policies regarding increased leverage, debt reduction, shareholder enhancement and future acquisitions.

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