Whole Foods Market Inc. (WFMI) has reached a settlement with the U.S. Federal Trade Commission to resolve the agency's antitrust challenge to the organic grocer's 2007 acquisition of rival Wild Oats Markets Inc.

In a settlement announced Friday, Whole Foods agreed to sell 32 Wild Oats stores in 12 states, including 19 that already have been closed.

In exchange, the FTC will drop its legal bid to undo the merger. The commission had argued that the merger would lessen competition in the market for natural and organic foods.

"As a result of this settlement, American consumers will see more choices and lower prices for organic foods," FTC Chairman Jon Leibowitz said in a statement. "It allows the FTC to shift resources to other important matters and Whole Foods to move on with its business."

Whole Foods Chief Executive John Mackey said in a statement, "We are pleased to have reached a mutually-satisfactory agreement with the FTC."

"We believe it was in the best interests of all our stakeholders to resolve this matter so we can dedicate our full attention to selling the highest quality foods available in our inviting store environments," Mackey said.

Whole Foods said that of the 19 already-closed stores it must sell, 10 stores were closed by Wild Oats before the merger and another nine were shuttered by Whole Foods after the merger was completed.

Twelve of the 13 active grocery stores Whole Foods must sell are former Wild Oats stores.

Mackey said it would be "business as usual" at the 13 operating stores while they are being prepared for sale.

The active stores up for sale had combined sales of $31 million in the first quarter of fiscal 2009, about 1.3% of Whole Foods' total sales of $2.5 billion, the company said.

Whole Foods said it expects to record a non-cash charge of approximately $19 million relating to the potential sale of the operating stores.

The FTC said that requiring Whole Foods to sell the 32 stores would restore competition in 17 geographic markets.

Under the terms of the agreement, a divestiture trustee will be in charge of selling the stores and will have six months to find one or more buyers, who must be approved by the FTC. The trustee can seek additional time to sell the stores.

The commission said the stores represent a significant portion of the Wild Oats locations that Whole Foods acquired, and is currently operating as well all of the formerly operating Wild Oats stores for which leases still exist.

Over the last two years, the dispute between Whole Foods and the FTC saw several twists and turns that made the case unlike most merger challenges in which antitrust concerns are resolved before companies decide to close a deal.

Whole Foods closed its Wild Oats acquisition in August 2007 after a federal judge rejected the FTC's initial attempt to block the merger, but a federal appeals court overturned that ruling a year later and revived the commission's case, throwing the deal into a state of uncertainty.

The two sides had been in settlement talks since late January. At the same time, the FTC was preparing to hold a full administrative trial on the legality of the merger in April.

-By Brent Kendall, Dow Jones Newswires; 202-862-9222; brent.kendall@dowjones.com