Whole Foods may have other bidders
Sale to Amazon isn’t a done deal yet
Amazon may have made an offer to buy Whole Foods Market for $13.7 billion, but that doesn’t close the door to other potential suitors — including, perhaps, Walmart.
A JPMorgan report released Thursday raises the possibility that Walmart will make a bid for Whole Foods, raising speculation about other companies that could reel in the one-time darling of the grocery world.
Though the notion of Walmart emerging as a bidder might sound far-fetched, investors aren’t counting out the possibility. Whole Foods shares closed Thursday at $43.20, $1.20 more than the price of Amazon’s bid Friday for the chain of more than 465 stores, indicating that investors put a premium on the grocery chain above what the online retailing giant was willing to pay.
Like Amazon, Walmart would view Whole Foods as a relative pipsqueak. Walmart has the largest share of the U.S. grocery market with 26.2%, according to Euromonitor. Whole Foods is eighth with 1.6%.
The two also would come with cultural differences.
Walmart is a price cutter that appeals to middle America, while Whole Foods has found loyal customers who prefer organic produce and are willing to pay higher prices for quality.
For Walmart, the real prize may not be Whole Foods, but rather entering the bidding in order to complicate life for Amazon.
The goal might be to suck up a lot of Amazon’s resources that could be better used in other ways, such as price investment and improving a chain’s tech-
nology and delivery options.
“What they could be doing is driving up the price to make it more expensive for Amazon to acquire,” said Michelle Grant, Euromonitor’s head of retailing. “The plan runs the risk you end up being the ultimate bidder.”
All this chatter raises questions of what others might want to outbid Amazon. Kroger. The chain has experience with acquisitions, but it already has a more upscale chain in its portfolio, Harris Teeter. And buying Whole Foods isn’t going to help the beleaguered chain innovate or compete on price.
Small chains. Many regional players are privately-held, including Albertsons, Publix, HyVee and ShopRite, and buying Whole Foods might give them a more national profile.
Wegmans and Trader Joe’s, which are also private, already are overlapping with Whole Foods. But topping Amazon’s bid would be difficult for any of them.
Foreign chains. European heavyweights, such as France’s Carrefour and Britain’s Tesco, might want to buy, rather than build, their way into the U.S. market.
Target. Acquiring Whole Foods might get it back in the good graces of better-heeled cus- tomers who recall its “cheapchic” origins.
Costco. The warehouse club is based on memberships and a revolving array of products. “The Costco membership model is similar to that of Amazon Prime,” Scott Rothbort, president of LakeView Asset Management and a Seton Hall University finance professor, wrote in a note.
Sprouts. This would be a case of getting called up from the minors. The Phoenix-based privately-held discount-organic chain has close to 270 stores in 15 states, a little less than half the size of Whole Foods.