24 June, 2017
Inc. said yesterday it plans to buy struggling natural and organic food pioneer Whole Foods Market Inc.in a $13.7 billion deal that would give the e-commerce giant 430-plus brick-and-mortar stores to distribute fresh food and other groceries.
After the announcement, Amazon's shares went up more than two percent and Whole Foods Market shares went up by about 28%. And, perhaps most importantly of all, it will force every Whole Foods customer to strongly consider signing up for Amazon Prime, which turns Amazon into their de facto source not only for online retail but for instant video and other media. The Seattle-based company already offers discounted Amazon Prime memberships for people receiving government assistance and is part of a pilot program to deliver groceries to food-stamp recipients.
A Moody's analyst described the Amazon-Whole Foods deal as a "transformative transaction, not just for food retail, but for retail in general".
The supermarket chain will continue to operate stores under the Whole Foods Market brand and John Mackey will remain the company's CEO, the release said. Amazon is paying $42 per share for Whole Foods, which is a 27 percent premium from Thursday's night close.
So news that Amazon has bought United States supermarket chain Whole Foods for $13.4bn is interesting but perhaps not surprising.
Consumers could also see more Whole Foods stores thanks to Amazon's financial might.
Amazon is making a bold expansion into physical stores with the $13.7 billion deal to buy Whole Foods, setting the stage for radical retail experiments that could revolutionize how people buy groceries and everything else.
In Whole Foods, it is acquiring a company that has recently come under pressure from investors for its lagging performance. It could have built up its groceries business without acquisitions, said Neil Saunders, managing director of GlobalData Retail, but that would have been costly and time-consuming.
West Hartford resident Nancy Kennedy, 88, who stopped by the Whole Foods store to shop, said she does not go online because she's not familiar with digital technology. Whole Foods will keep operating stores under its name.
Whole Foods may offer fewer jobs going forward if Amazon takes it over.
Whole Foods' conversations with banks took place before the company was approached by Amazon, so Goldman was also vying for a role with Whole Foods. And the key measure that retailers look at to gauge their health, revenue at stores open more than a year, has fallen for seven quarters in a row.
"This is an quake rattling through the grocery sector as well as the retail world", said Mark Hamrick, senior economic analyst for Bankrate.com. Anderson advised Whole Foods alongside senior Evercore bankers Eduardo Mestre and William Hiltz. It's expected to be official in the second half of 2017.
