Amazon buying Whole Foods in $13.7 billion push into selling groceries

by Ben Pena June 22, 2017, 6:00
Amazon buying Whole Foods in $13.7 billion push into selling groceries

News that internet retailer Amazon is ponying up $13.7 billion to buy grocery chain Whole Foods has resulted in billions of dollars worth of stock value damage in the retail and food categories.

"We want to assure you that Amazon shares Whole Foods Market's deep commitment to quality and customer service". Whole Foods shares were trading just under that level in early trading on Friday, as investors saw negligible regulatory risk to the deal closing.

In 2016 alone, Whole Foods had sales of $16 billion across its more than 460 stores in the United States, Canada and the United Kingdom.

The deal valued at $13.7 billion unites the company that persuaded people to buy books - and then everything else - online with the grocery store chain that fell behind as shoppers found "good enough" alternatives to the organic and natural foods it helped popularize.

Whole Foods will keep operating stores under its name and John Mackey will as CEO, with headquarters in Austin, Texas. This year, Amazon is expected to the ninth largest retail grocery. While it's competitor Wal-Mart has announced a Dollars 3.3 Billion for Jet.com past year and UD 310 Million for internet apparel retailer Bonobos, Amazon wanted its customers to visit the store physically to but fruits, vegetables and meat.

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

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Meanwhile, Whole Foods stock soared on the news, jumping almost 30 percent by mid-morning. The deal includes all 34 Bay Area Whole Foods stores.

The grocery market, a $750 billion sector in the US, is one of the few provinces in the retail world that Amazon hasn't managed to radically alter. And the company has launched an offshoot chain named after its "365" private label brand, a nod to the popularity of no-frills chains that draw shoppers with low prices. It announced last Friday that it had agreed to buy online clothing company Bonobos for US$310 million.

ALINA SELYUKH, BYLINE: It's lunch hour, and people are dipping in and out of a Whole Foods store in Washington, D.C. This particular shop has only been open for three months, but the chain's brand has had nearly 40 years to grow. And shoppers may be skittish about having Amazon take over one more element of their shopping experience.

"This might be an opportunity for consumers who have felt that Whole Foods is inaccessible", said Lauren Beitelspacher, a marketing professor at Babson College in MA. According to the analyst, the grocery industry remains one of the "largest and most under-penetrated markets" for the e-commerce giant.

Costco, the wholesale club company, gave up $12.44, or 6.9 percent to end at $167.64.

With the deal slated to close later this year, here is a list of investors and investment funds who made the most between Thursday's close and Friday morning when the news was announced, based on recent Securities and Exchange Commission filings.


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