Amazon pays $13.7 billion for Whole Foods
June 16, 2017
The all-cash deal - involving no debt or equity swaps - will see Amazon acquiring the Texas-based organic and specialty food retailer for $42 (36 euros) a share, a 27-percent premium over Whole Foods Market's closing stock price on Thursday. Whole Foods stock had been selling in the mid-$30 range for May and the first part of June.
Trading of Whole Foods shares was halted on Friday, while Amazon's stock rose 2.0 percent to $983.40 in pre-market trading.
The deal is the latest big move for Amazon and its 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. Amazon has been experimenting with bookstores and a small grocery, but this is its most ambitious move into physical retail.
"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.
Virtual to reality
Whole Foods has been facing pressure from activist investors. It has over 430 locations, but the company has found it difficult to attract more mainstream consumers as Walmart and other large chains have stepped up their sales of natural and organic products.
The transaction is expected to close in the second half of 2017 following regulatory approval and a Whole Foods shareholder vote. The company will continue to operate stores under its brand name and be run by co-founder and chief executive John Mackey, the companies 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," Mackey said in a statement.
A new move
"Amazon can pour money into any investment and they don't need to make money. Investors are used to them not making money. It is $13.7 billion but it is still small relative to the size of the whole company," Tim Ghriskey, chief investment officer at Solaris Asset Management, told Reuters.
As recently as May, Whole Foods replaced five board members and its chief financial officer, under pressure from Jana Partners.
"It seems like a bit of an odd purchase because it is brick-and-mortar retail. On the other hand it gives them a distribution footprint to deliver goods in a short time frame," according to Ghriskey. "This could be part of that strategy - you take part of a Whole Foods Store and you add in Echo and all the other Amazon products. More and more, we will see Amazon brand products as they work to create their own brand at retail."
jbh/tr (Reuters, AFP)