AMAZON IS BUYING WHOLE FOODS FOR $13.7 BILLION SHAKING GROCERS AND RETAIL STOCKS
Amazon made a stunning move to boost its growing grocery business announcing it would buy Whole Foods Market for $13.7 billion.
The deal shows Amazon’s interest in moving into the business of operating traditional brick-and-mortar stores, even as traditional retailers crippled by Amazon’s growth have announced a series of store closings.
Amazon agreed to pay $42 a share in cash for the organic-food chain, including debt, a roughly 27 percent premium to the stock price at Thursday’s close.
Whole Foods Market will continue to operate stores under the Whole Foods Market brand and source from trusted vendors and partners around the world. John Mackey will remain as CEO of Whole Foods Market and Whole Foods Market’s headquarters will stay in Austin, Texas.
“This partnership presents an opportunity to maximize value for Whole Foods Market’s shareholders, while at the same time extending our mission and bringing the highest quality, experience, convenience and innovation to our customers,” said John Mackey, Whole Foods Market co-founder and CEO.
AMAZON WANTS TO DOMINATE THE FOOD RETAIL BUSINESS
For Amazon, the deal is more about getting a distribution network for groceries, said Michael Pachter, an analyst at Wedbush Securities Inc. It has spent years trying to break into delivering groceries, but hasn’t been as successful as in other categories, according to Bloomberg.
“Amazon clearly wants to be in grocery, clearly believes a physical presence gives them an advantage,” Pachter said to Bloomberg. “I assume the physical presence gives them the ability to distribute other products more locally. So theoretically you could get 5-minute delivery.”
The grocery chain has more than 460 stores in the United States, Canada and United Kingdom. Founded in 1978 in Austin, Texas, the company employs approximately 87,000 workers.
“Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades – they’re doing an amazing job and we want that to continue,” said Jeff Bezos, Amazon founder and CEO in a press release.
The announcement cause a shock wave in the Stock Market. CNBC reported that Amazon stock rose 3 percent while Whole Foods shares skyrocketed 28 percent. Shares of large grocery chains dropped following the news.
Kroger sank 14.5 percent. Supervalu plummeted 17 percent while Costco fell 7 percent. Sprouts Farmers skidded 12.7 percent, and United Natural Foods dropped more than 15 percent.
Discount retailers Target and Wal-Mart also fell after the deal’s announcement. Target was down 10 percent while Wal-Mart was down 6.7 percent.
The parties expect to close the transaction during the second half of 2017.
