Tuesday, August 21, 2007

What does satellite radio have in common with organic food?

More than one would think.

In a proverbial nutshell, you are probably aware that XM and Sirius want to merge and thus have become the target of Federal Communication Commission scrutiny. The commission is currently considering whether to approve the deal. The Justice Department has to OK the merger, too.

But what does that have to do with natural food?

The Federal Trade Commission lost a case last week that would have blocked a merger of a company called Whole Foods and its competitor, Wild Oats. Whole Foods, a Fortune 500 company, is the world’s leading retailer of natural and organic foods, according to its Web site. Wild Oats Marketplace is a successful company, too, and it seems from a Wild Oats press release that both CEOs think a merger would be a good move for both companies.

FTC argued that Whole Foods’ $565-million grab of Wild Oats would really mess with the health food industry. FTC thought it would create a monopoly that could result in higher prices, so they filed an injunction to stop the deal. On Thursday, U.S. District Judge Paul Friedman decided he did not see it that way and refused to block the merger. Apparently, the judge thought the sector was not so narrow after all and it would not create a monopoly. After all, the people in the organic and natural food industry compete with a bigger market, not just each other.

Now to the point: I know not everyone agrees, but in my opinion, XM and Sirius don’t just compete against each other, but against terrestrial radio and iPods.

If the marriage of Whole Foods and Wild Oats would not create world domination, then the merger of XM and Sirius can be seen similarly.

And that’s what has analysts saying the judge’s decision is a promising development for the satellite radio merger plan.

Despite the latest development – FTC’s appeal – Whole Foods and Wild Oats are making plans to tie the knot soon. Shares of XM and Sirius are on the rise with that news.