The $700 million Whole Foods-Wild Oats merger, first announced in February, then put on hold by the Federal Trade Commission regulators concerned about perceived anticompetitive effects, has inched closer to completion. The proposed deal includes $565 million in cash, or $18.50 per Wild Oats share, plus assumption of debt.

On Aug. 16, a district court judge rejected the FTC's request for a temporary injunction against the merger, making a finalized deal much more likely.? U.S. District Judge Paul L. Friedman apparently rejected the FTC's argument that the merger would stifle competition and raise prices for organic shoppers.? The judge filed his opinion under seal, so his specific conclusions about the government's case are not yet known.

However, on Aug. 17, the U.S. District Court of Appeals agreed to hear the FTC's appeal, delaying the merger for at least another week.

"The most important finding is the decision to deny the preliminary injunction," said Paul Yde, a senior antitrust partner in the Washington, D.C., office of Freshfields Bruckhaus Deringer and a former FTC counsel. "It is much more probable than not that the court of appeals will confirm the decision by the district court. They will confer some deference to the district court's decision."

Whole Foods also seemed confident that the appeals was merely a final speed bump before the merger is consummated. ?"We have reviewed Judge Friedman's 93-page opinion supporting his denial of the the FTC's request for a preliminary injunction. The opinion is firmly grounded in both the facts and the law," said Whole Foods attorney Paul T. Denis in a statement. "We are confident that the merger will be allowed to proceed."

The FTC's June 6 decision to deny Whole Foods' acquisition of its chief competitor in the natural products market caught many analysts off guard.? But in mid-June, unsealed court documents revealed that the FTC was concerned with statements made by Whole Foods CEO John Mackey to his board.??

Mackey reportedly told his board that the merger would "eliminate forever" the possibility of a nationwide natural foods competitor, and would "avoid nasty price wars" in cities where Whole Foods and Wild Oats compete.? (Whole Foods reportedly will scuttle Wild Oats' planned superstore in Boulder, which would have cost the Boulder Whole Foods location as much as $180,000 per week in lost revenue.)

When the FTC's objections became public, Mackey fought back, using his personal blog on the Whole Foods Web site to attack the FTC's reasoning.

"Once it became public that [the] FTC had these documents describing Mackey's views of the market and likely effects of the acquisition, it was not surprising at all that [the] FTC pursued the case," Yde said.

Yde said that the long delay has had a negative effect on Wild Oats in particular, making it difficult for the target company to maintain its employee base.? Since the acquisition was first announced, Wild Oats stock is down 10 percent, and the latest quarterly earnings statement shows the chain broke even. However, news of the district court's decision brought stock back up from the mid-$15 range to $18 per share.