Whole Foods Markets, Inc (NYSE:WFMI) announced at 4:03 pm -- a couple minutes after its 4:01 pm earnings report -- that it's acquiring competitor Wild Oats Markets (NYSE:OATS) for $18.50 a share, or about $565 million, plus debt. This represents an 18% premium over OATS's closing price. And the market likes it -- bidding up WFMI by 2% in after-hours trading.

OATS has annual sales of about $1.2 billion, compared to WFMI's $9.6 billion. OATS was founded in Boulder, CO, in 1987 and currently operates 110 stores in 24 states and British Columbia.

WFMI was expected to post earnings of 41 cents a share but it fell short by 3 cents -- posting earnings of $53.8 million, or 38 cents per share, in its fiscal first quarter, compared to a profit of $58.3 million, or 42 cents per share, a year earlier. Sales rose to $1.87 billion from $1.67 billion.

58% of Blogging Stocks readers expected WFMI to exceed analysts' expectations; only 15% thought it would miss.

WFMI's CEO thinks that the OATS deal will satisfy its earnings hunger. Its 11 operating regions will gain stores in three of its smallest regions -- Pacific Northwest, Rocky Mountain, and Florida. He also believes the deal will give WFMI access to new markets.

I prefer the WFMI shopping experience to the OATS one and I'd wait and see before plunging in to WFMI shares.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm, He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Whole Foods or Wild Oats.

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