Amazon is buying Whole Foods in $13.7B deal


Whole Foods CEO said, "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".

Grocery stores, which have low profit margins, have also been competing more intensely when it comes to price. The stores could teach cooking skills, hold classes and educate about food.

Charlie O'Shea, a Moody's lead retail analyst, told the Associated Press news agency that the deal could be "transformative, not just for food retail, but for retail in general". The grocery store operator was also under pressure from activist investor Jana Partners.

Inside the stores, Whole Foods customers could see big changes, including easier checkouts.

Amazon "will likely utilize Whole Foods' existing infrastructure to shake up the brick-and-mortar market", she said, "while taking advantage of its supply chain to make the online side of the business more cost-effective".

Some speculated that the stock rose above $42 in anticipation that another buyer could emerge to challenge Amazon, potentially kicking off a bidding war for the 37-year-old grocery chain. The company will apply that model to the Whole Foods system, said Cooper Smith, head of Amazon research at L2, a consulting company.

In Florida, grocery delivery programs have been gaining in popularity.

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Stocks of Whole Foods' competitors plunge following the company's acquisition by Amazon.

"I like picking out my own stuff", Hall said. "So theoretically you could get 5-minute delivery". The investment firm Jana Partners said in April that it had built up an ownership stake in Whole Foods because it saw ways to address its "chronic underperformance for shareholders".

SAM BERNSTEIN: I don't know. It's simply matter of putting them in the basket.

The move solidifies Amazon's longer-term expansion into groceries, which it has flirted with for years.

"No one excels at reducing pricing than Amazon", Steven Johnson of Foodservice Solutions said. "It's like a walk in the park", he said.

Whole Foods customers who are Amazon Prime members, meanwhile, could get discounts on certain products. He added that these are likely the higher-income households who tend to buy more expensive brands and cuts of meat.

Investors worry that Amazon, which has already won over hordes of shoppers of clothing, electronics and many other kinds of goods, wreaking havoc on department stores and other brick-and-mortar retailers, will do the same thing with groceries. Target tumbled by 10 percent and Walmart was down by 6 percent.

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The bombshell news caused grocery store stocks to dip. Among the company's largest acquisitions are its 2009 purchase of online shoe retailer for roughly $1.2 billion, and video game streaming site Twitch, which it bought in 2014 for roughly $1 billion.

"Amazon didn't just buy a grocery retailer".

Headquartered in Austin, Texas, Whole Foods was founded in 1978 and now has more than 460 stores with about 87,000 employees in the United States, Canada and Britain. Amazon is buying Whole Foods Market: a $13.7 billion deal.

"I think that this takes all of the pressure off Whole Foods and gives Whole Foods the opportunity to revitalize that business and of course it stems the criticism from all of these activist investors", said Neil Saunders, managing director of GlobalData Retail in NY. She thinks that the agreement is a great outcome for the supermarket operator, as she thought that an acquisition by a large traditional supermarket is not a viable fit for Whole Foods.

Senior management at Instacart, the exclusive online ordering and delivery service for Whole Foods - learned that Amazon was buying the supermarket chain via the same announcement as everyone else, according to a person familiar with the matter. While both companies aren't headquartered here - check out Austin Inno for the deal's impact on Whole Foods' home base - the deal is certainly going to have an impact here and everywhere else across the country, if only due to their collective reach.

He said he expects the marketing to begin shortly after the combined company closes the deal in the second half of the year.

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