Amazon acquires huge grocery store chain

Marcus Newton
June 20, 2017

"We are always concerned when there is some loss of brick-and-mortar stores out there", Mullins said after just hearing of the news early Friday. It will take over a natural and organic grocer pioneer with 456 stores, a mecca for young, high-end shoppers, that has been struggling to rein in prices and integrate technology.

The Seattle-based company already offers discounted Amazon Prime memberships for people receiving government assistance and is part of a pilot program to deliver groceries to food-stamp recipients.

The almost $14 billion deal is the largest purchase in Amazon's history.

Amazon, which is sitting on US$21.5 billion in cash, has recently begun experimenting with bookstores and a small grocery but this is by far its most ambitious move into physical retail. And Whole Foods shares climbed 29 percent to $42.68 Friday - more than the $42 deal price - indicating investors expect another bidder may emerge.

Whole Foods sent a letter to customers after the merger announcement, calling the agreement a new chapter in Whole Foods' history and an incredible opportunity.

Amazon said on Friday that it would buy Whole Foods for $13.7 billion. Amazon would be able to sell Whole Foods prepackaged meals, which make up about 20 percent of Whole Food's sales now, Stone says.

Activist hedge fund Jana, led by Barry Rosenstein, disclosed a almost 9 percent stake in Whole Foods in April.

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For now, the Amazon-Whole Foods deal seems unlikely to change much.

Amazon has been eyeing stores that could allow traditional in-store purchases, online ordering with on-site pickup and home delivery, using the stores' warehouses as distribution points.

Costco: While it's not particularly known to be techie, the company remains the third biggest supermarket chain worldwide, trailing Walmart and Carrefour in France.

"They're doing an unbelievable job and we want that to continue", Amazon founder and CEO Jeff Bezos said.

Jana Partners, the hedge fund that Whole Foods Market Inc Chief Executive John Mackey lambasted as "greedy bastards", stands to make roughly $300 million from the sale of the grocery chain to Amazon.com Inc.

Both companies said there will be no layoffs, but they did not respond to other questions about Amazon's plans for Whole Foods. (NASDAQ:WFM) in a deal valued at around $13.7 billion. The acquisition price implies a trailing 12-month price-to-earnings multiple for Whole Foods of 31 times, versus a 14.4 average for the S&P 500 Food Retail index.

Amazon's deal to purchase Whole Foods was big. It has expanded from a book seller into a merchant of almost all consumer products, as well as producing videos. Whole Foods itself had launched an offshoot chain named after its "365" private label brand in a nod to the popularity of no-frills chains. It wasn't until 2015 that the number of pure grocery stores actually started to decline, according to government numbers, and then only slightly. Amazon could integrate it with technological advancements to improve the shopping experience, and, in turn, help Whole Foods rein in revenue. Despite its likely new ownership equation-the deal hasn't yet closed-Instacart is doubling down on its anti-Amazon rhetoric.

Other reports by MaliBehiribAe

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