26 June, 2017
Amazon will acquire Whole Foods Market for $42 per share in an all-cash transaction valued at about $13.7 billion, including Whole Foods Market's debt.
Shares of Wal-Mart Stores Inc. fell 4.7 percent to $75.24, and Target shares dropped 5.1 percent to $52.61, signaling fears that Amazon could reduce Whole Foods' prices and broaden its product mix.
The grocer will continue to operate stores under the Whole Foods Market brand, the companies said.
The online giant a year ago declared its plans to open a physical grocery store called Amazon Go, a market without cashiers where consumers would be automatically charged based on the items they placed into their shopping bags. Although Amazon's plans for Whole Foods is not clear, the acquisition has some wondering what will happen to the chain's existing stores. Closing at $22.29, Kroger stock plunged another 9 percent after it crashed 19 percent Thursday in its worst day since 1999.
Completion of the transaction is subject to approval and the parties expect to close the transaction during the second half of 2017. Our downside scenario is $42, which is equal to Amazon's current bid... "If shoppers are going to allow a company, a retailer, to pick their meat, their produce and their seafood, Whole Foods is probably at the top of the list of retailers with the best reputation across the country". Over the past few years, #Grocery Retailers have fought against online entrants into the market, and with this most recent purchase, the fight has only grown.
"It is hard to say what Amazon's online strategy will be for Whole Foods", she said. The process was influenced by Amazon's own plans to build out a network that would have competed against Whole Foods, the people added.
John Mackey will remain as CEO of Whole Foods Market and Whole Foods Market's headquarters will stay in Austin, Texas.
For Amazon, the deal marks an ambitious push into the mammoth grocery business, an industry that in the United States accounts for around $700 to $800 billion in annual sales.
Amazon Go doesn't employ robots to stock shelves - at least not yet. At the time, Whole Foods called Instacart its largest partner for online ordering and delivery. It has expanded from a book seller into a merchant of almost all consumer products, as well as producing videos. She shops at Whole Foods for organic food and nitrate-free deli counter products and also visits farmers markets to buy fruits and vegetables.
It can be expected in the future to see a price war in the grocer industry, and an increase in online business as Amazon's purchase has seemed to create a greater need for other companies to infiltrate this sector. Bank of America Corp also provided financing to Amazon, while Evercore Partners Inc advised Whole Foods.
Both Amazon and Whole Foods cater to younger consumers including millennials as well as the affluent.
