Natural Foods Merchandiser

Planet Organic to acquire Mrs. Green's in U.S. debut

Planet Organic Health Corp. has signed a letter of intent to fully acquire Mrs. Green's Natural Market on April 30. The sale will more than double Planet Organic's revenue, which last year was $32.7 million. Mrs. Green's 2006 revenue was $38.1 million.

For Planet Organic, the purchase is more than a financial acquisition, but also the first part of a strategic initiative to move into the U.S. market.

"This is just the beginning of the journey," said Darren Krissie, vice president and chief financial officer at Planet Organic. "It opens up doors for us to the U.S. market and brings the potential for continued expansion and new store acquisition."

Planet Organic currently runs eight natural food supermarkets across Canada, as well as seven Healthy's stores and another 50 Sangster's Health Center stores. Planet Organic also owns Trophic Canada, a Canadian manufacturer of natural supplements.

Mrs. Green's is a privately held retailer with 11 stores in Connecticut and New York. Mrs. Green's founders and owners, Harold and June Hotchberger, will remain onboard to support Planet Organic through the acquisition.

Planet Organic is no newcomer to acquisition and expansion. Founder Mark Craft started the company in Alberta in 1978 with just one store. By 1993, Craft and partners purchased High Level Natural Foods, renaming the store Terra Natural Food Market, and then adding stores, changing the name to Planet Organic and expanding across Canada over the next several years. In 2004, Planet Organic acquired Great Ocean Natural Food Market in Nova Scotia, the chain of Sangster's Health Centers and Trophic Canada.

"Because neither company [Planet Organic or Mrs. Green's] is that big, the overall impact at present on the market is probably negligible," said Kevin Coupe of and owner of Coupe Communications, based in Darien, Conn. "But we will probably be seeing a lot more of this type of consolidation as we have recently with the Whole Foods acquisition of Wild Oats. These acquisitions allow companies, especially smaller ones, to centralize buying power and become more competitive."

While Planet Organics seeks to increase market share and become more competitive, it won't be competing directly with behemoth retailers such as Whole Foods.

"This is the start of our growth strategy in the United States," Krissie said. "We are focused on working with the smaller footprint store, meaning stores under 15,000 square feet and primarily under 10,000 square feet. At this size, we can go into new and smaller markets our larger competitors can't."

"Competing with Whole Foods is like competing with Wal-Mart," Coupe said. "And Wal-Mart's plan to get into organics could eventually put pressure on retail pricing and margins. Planet Organic is smart to differentiate and compete with the smaller store."

Coupe also said that while plenty of retail opportunity still exists in the natural and organic marketplace, the market itself might not yet be big enough to handle a surge of new retailers, and stores need to be careful not to outpace the market.

The purchase price for the Mrs. Green's sale is subject to closing adjustments relating to prepaid expenses and working capital as of April 30. Any upward adjustments to the purchase price resulting from working capital adjustments will be satisfied via the issuance of Planet Organic common shares at $2.50 per share. A portion of the purchase will be funded through the private placement of $6 million of Planet Organic shares at $2.50 per share available to institutional and accredited investors.

Chris O'Brien is a Boulder, Colo.-based freelance writer.

Natural Foods Merchandiser volume XXVIII/number 5/p.9

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