Whole Foods Merger Delayed

Updated from 1:08 p.m. EDT

SAN FRANCISCO -- A court ordered Whole Foods(WFMI Quote) and Wild Oats (OATS Quote) to temporarily halt their steps toward a merger as it considers a government appeal protesting the combination.

The U.S. District Court of Appeals for the District of Columbia agreed to a Federal Trade Commission request for an emergency stay, which came just in time for a noon EDT deadline that would have allowed the two grocers to start combining their businesses in a $565 million deal.

The FTC is appealing a decision by a district court judge last week rejecting its request for a temporary injunction against the merger, which the agency argues will result in a monopoly in the organic food sector.

Whole Foods and Wild Oats have until 4 p.m. EDT Wednesday to file a response to the appeal. The FTC has until noon EDT Thursday to follow up to that response.

The court issued the stay so that it would have more time to consider the appeal. In its order, the court stated that the stay "should not be construed in any way as a ruling on the merits."

The FTC had no comment on the decision. Whole Foods could not be reached for comment.

"Obviously it delays the merger from closing," says Wild Oats spokeswoman Sonja Tuitele. "We're just going to work through this process and hope that it will be resolved quickly."