Amazon to buy Whole Foods Market for $13.7 billion
Amazon and Whole Foods Market have entered into a definitive merger agreement under which Amazon will acquire Whole Foods Market for $42 per share in an all-cash transaction valued at approximately $13.7 billion, including Whole Foods Market’s net debt.
Amazon and Whole Foods Market have entered into a definitive merger agreement under which Amazon will acquire Whole Foods Market for $42 per share in an all-cash transaction valued at approximately $13.7 billion, including Whole Foods Market’s net debt.
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. Completion of the transaction is subject to approval by Whole Foods Market’s shareholders, regulatory approvals, and other customary closing conditions. The parties expect to close the transaction during the second half of 2017.
“Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy,” said Jeff Bezos, Amazon founder and CEO. “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.”
According to The Washington Post, news of the deal sent shares of rival grocers plummeting as investors tried to digest the implications of an Amazon-backed grocery chain. SuperValu, with a network of 2,000 stores across the United States, experienced a 14% drop on June 16. Kroger, rumored late last year to be considering its own takeover of Whole Foods, was down 9%. Meanwhile, shares of Whole Foods rose nearly 30% and Amazon stock rose more than 2%.
The deal gives Amazon control of Whole Foods’ 431 brick and mortar stores, which could help solve Amazon’s “last-mile” delivery challenge for fresh groceries. That is “arguably the biggest single reason that Amazon has not been able to make a dent in the grocery shopping of the 60% of Millennials who already buy other items from Amazon,” according to the market research company The NPD Group. The AmazonFresh delivery service has been around for a decade but has been slow to take off, accounting for 0.8% of all grocery purchases in 2016.
Of the people who already buy groceries through the internet, 52% of them are Amazon Prime members, according to research from The NPD Group. Those 431 stores suddenly make it easier for those Prime members, who tend to purchase heavily through Amazon, to get access to fresh produce/foods.
“Fresh foods are the final frontier for Amazon,” said David Portalatin, vice president, industry analysis, food, The NPD Group. “And figuring out how to get it to your front door is the ultimate in convenience for consumers. In order for Amazon to get the volume growth they are looking for, fresh foods have to be part of the equation. This deal gives them credibility with consumers and a major foothold in that space.”