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Amazon Deal for Whole Foods Wins Regulatory, Shareholder Approvals

Phase 2

On August 23, Washington-based Amazon.com, Inc. cleared two of the biggest hurdles it needed to close its $13.7 billion acquisition of Texas-based Whole Foods Market with approvals from a U.S. regulator and the grocery chain’s shareholders, according to Reuters.

The U.S. Federal Trade Commission (FTC) said in a statement it would not pursue its investigation into the proposed merger further after reviewing whether the deal would substantially lessen competition or constituted an unfair method of competition.

Amazon said it was on track to close the merger, expected sometime this year. Earlier on August 23, Whole Foods said its shareholders voted in favor of the deal.  

Buying Whole Foods gives the world’s largest online retailer a foothold in the $700 billion U.S. grocery market, key for it to grab a greater share of shoppers’ wallets. It also gives Amazon more than 465 brick-and-mortar stores where it could showcase products and ready packages for home delivery.

The marriage between the online retailer and the pioneer organic grocery seller has sent shockwaves through the supermarket industry, already in the midst of a price war.

Much larger grocers like Kroger Co., with 2,796 retail food stores, and Wal-Mart Stores Inc are racing to add online shopping options so they do not give ground to Amazon. Meanwhile, they are being forced to discount items as German grocery chains Aldi and Lidl expand in the United States.

“They’re definitely under pressure,” said eMarketer analyst Patricia Orsini. Without “some sort of e-commerce strategy … you’re going to lose those shoppers to a competitor.”

Amazon has a loyal and spendthrift following thanks to its shopping club Prime. However, its decade-long effort to deliver groceries to customers’ homes has been unable to unseat brick-and-mortar rivals.

“Prime members are keen to learn the benefits of a bricks-and-mortar approach to Amazon Grocery,” said Baird Equity Research analyst Colin Sebastian.

“The deal will close after they sort out more ‘back office’ issues,” he noted.

Whole Foods shares rose 0.7 percent in after-hours trading to $41.96, still shy of the deal’s $42 per-share price tag. Amazon shares dipped 0.4 percent, while shares of Kroger and Wal-Mart were largely unchanged, as reported by Reuters.

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