Amazon buys grocer in brick-and-mortar move
AMAZON is once again shaking up the retail sector, with the announcement on Friday it will acquire upscale US grocer Whole Foods Market, in a deal that underscores the online giant’s growing influence in the economy.
The purchase in one fell swoop gives Amazon, which until now has operated almost entirely on the internet, a big presence in the brick-and-mortar world on Main Street, with more than 450 stores in the US, Canada and Britain.
In the $13.7 billion, all-cash deal, Amazon will buy the Texas-based champion of organic and specialty food for $42 a share. Whole Foods’ shares traded in the mid-$30 range for May and early June.
The announcement had immediate and punishing consequences on Wall Street for retailers, such as Wal-Mart Stores, that sell groceries and are expected to face even tougher competition with Amazon now much more active in the space.
But shares ofWhole Foods shot up 29.1 percent to close at $42.68, while Amazon jumped 2.4 percent to $987.71, a gain of $11.3 billion in market capitalisation, close to the value of the deal itself.
However, S&P placed Amazon on credit watch with negative implications on expectations the company will increase debt to finance the takeover.
Whole Foods will continue to operate stores under its brand and will continue to be led by co-founder and Chief Executive John Mackey, the companies said.
Mackey helped grow the company from a tiny health-conscious grocer in Texas into a giant in upscale chain in all but eight US states.
“This partnership presents an opportunity to maximise 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,” Mackey said.
In May, under pressure from Jana Part- ners, Whole Foods replaced five board members and its chief financial officer. The hedge fund said the company was undervalued and needed to overhaul its operations and consider “strategic alternatives”, code for a sale.
Mackey, who has viewed Whole Foods as a “mission-driven” company aimed at improving American food, castigated Jana as an example of craven capitalism looking for a quick profit.
“They’re greedy b—, and they’re putting a bunch of propaganda out there, trying to destroy my reputation and the reputation of Whole Foods,” Mackey told Texas Monthly in a profile published this week.
Jana’s gains from the deal were estimated by financial media on Friday at about $300 million.
The deal is the latest big move for Amazon and its charismatic Chief Executive Jeff Bezos, who grew Amazon from a small online bookseller in the 1990s into a global retail behemoth that delivers a wide range of goods and creates award- winning entertainment broadcasts.
“Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy,” Bezos said, adding, “they’re doing an amazing job and we want that to continue.”
The transaction is expected to close in the second half of 2017 following regulatory approvals and a vote by Whole Foods shareholders.