The FTC wants to bring back Wild Oats

How do you de-merge two companies? The FTC thinks that the marriage of Wild Oats and Whole Foods (NASDAQ: WFMI) was anti-competitive. Too much concentration in the high-end organic food retail business.

The FTC brought charges against Whole Foods to stop the deal, but the agency did not get its bite at the apple until after the merger had closed. Now it wants to take apart what it sees as a firm created against the better interests of consumers.

According to The Wall Street Journal, the FTC wants all the stores that carried the Wild Oats name to take down their Whole Foods signs and put the old name back up. "The FTC also said it has asked Whole Foods to voluntarily halt further integration of the two companies while the FTC continues its legal challenge to the merger."

Killing a merger that is already done has to be fairly hard. If the FTC prevails, what does Whole Foods do? Does it hire a new management team and spin Wild Oats out into a new public company? Does it restate all of its recent financials to back out Wild Oats results?

From a legal standpoint, the FTC may be right, but rebuilding Wild Oats could kill the company, especially during a recession. The costs of turning it into a standalone operation could be so great that the financial burden would be more than the retailer could bear. Wild Oats might become independent again only to go bankrupt.

The government may be right, but it is not practical.

Douglas A. McIntyre is an editor at 24/7 Wall St.