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Amazon to Acquire Whole Foods for $13.7 Billion

Nicholas Saraceno | June 16, 2017

According to Bloomberg, Amazon.com Inc. (Washington) will acquire Whole Foods Market Inc. (Texas) for $13.7 billion, a deal that catapults the e-commerce giant into the supermarket business with hundreds of stores across the U.S.

Amazon agreed to pay $42 a share in cash for the organic-food chain, including debt, a roughly 27 percent premium to the stock price at Thursday (June 15)’s close. John Mackey, Whole Foods’ co-founder, will continue to run the business — providing a lifeline to the executive after a fight with activist investor Jana Partners (New York).

The deal sends a shockwave across both the online and brick-and-mortar industries, uniting two brands that weren’t seen as obvious partners. But Whole Foods came under pressure to find a buyer this year after Jana acquired a more than 8 percent stake and began pushing for a buyout. Jana’s move irked Mackey, who has referred to Whole Foods as his “baby.” By enlisting Amazon, he gets to keep his job as chief executive officer of the grocery chain.

Whole Foods shares jumped 27 percent to $41.99 as of 10 a.m. in New York, bringing them close to the transaction price. Amazon shares gained 3.2 percent to $995.

For Amazon, the deal is more about getting a distribution network for groceries, said Michael Pachter, an analyst at Wedbush Securities Inc. It has spent years trying to break into delivering groceries, but hasn’t been as successful as in other categories.

Amazon previously contemplated a takeover of Whole Foods last fall, but it didn’t pursue a deal, a person with knowledge of the situation has said. The e-commerce company revisited the idea after Jana stepped in.

“Amazon clearly wants to be in grocery, clearly believes a physical presence gives them an advantage,” Pachter said. “I assume the physical presence gives them the ability to distribute other products more locally. So theoretically you could get five-minute delivery.”

The transaction also may help Amazon sideline Instacart Inc., a startup that has delivered grocery orders from Whole Foods stores in more than 20 states and Washington, D.C.

For the full article, visit https://www.bloomberg.com/news/articles/2017-06-16/amazon-to-acquire-whole-foods-in-13-7-billion-bet-on-groceries.

Whole Foods shares jumped 27 percent to $41.99 as of 10 a.m. in New York, bringing them close to the transaction price. Amazon shares gained 3.2 percent to $995.

The transaction also may help Amazon sideline Instacart Inc., a startup that has delivered grocery orders from Whole Foods stores in more than 20 states and Washington, D.C.

For the full article, visit https://www.bloomberg.com/news/articles/2017-06-16/amazon-to-acquire-whole-foods-in-13-7-billion-bet-on-groceries.