Amazon announced today that it has agreed to purchase Whole Foods Market.
Amazon (NASDAQ:AMZN) and Whole Foods Market, Inc. (NASDAQ:WFM) today announced that they have entered into a definitive merger agreement under which Amazon will acquire Whole Foods Market for $42 per share in an all-cash transaction valued at approximately $13.7 billion, including Whole Foods Market’s net debt.
Amazon to Acquire Whole Foods Market, BusinessWire, 16 June 2017
The New York Times reports that Amazon wishes to expand beyond online retail into physical stores.
The company is experimenting with physical stores. The Atlantic reports that “Amazon needs food and urban real estate.” The company has opened a small chain of book stores across the country. In Seattle, Amazon has opened two drive-through grocery pickup locations; customers order their items online.
With Whole Foods, Amazon will acquire more than 460 stores in the United States, Canada and Britain.
“’The Whole Foods acquisition provides them more physical locations. They’re going to be within an hour or 30 minutes of as many people as possible.’”
Mikey Vu, partner (retail), Bain & Company
Whole Foods’ urban and suburban locations are extremely valuable for Amazon’s delivery business.
“’Amazon did not just buy Whole Foods grocery stores. It bought 431 upper-income, prime-location distribution nodes for everything it does.’”
Dennis Berman, financial editor, the Wall Street Journal, via Twitter
Whole Foods, The Atlantic reports, “needs help.” While Whole Food Market sales were approximately $16 billion in the 2016 fiscal year and while the United States grocery industry produces approximately $700 to $800 billion in annual sales, the grocery business is low-margin. Whole Foods revenue growth has fallen every year since 2012. Whole Foods investors have been encouraging the company to sell itself to a larger grocer like Kroger.
Under the terms of the proposed deal, Amazon would pay $42 a share for Whole Foods, a 27 percent premium to Thursday’s closing price.
Completion of the transaction is subject to approval by Whole Foods Market’s shareholders, regulatory approvals and other customary closing conditions. The parties expect to close the transaction during the second half of 2017.
Amazon to Acquire Whole Foods Market, BusinessWire, 16 June 2017
Whole Foods was founded in 1978 in Austin, Texas.
See:
“Amazon to Buy Whole Foods in $13.4 Billion Deal” | Michael J. de la Merced & Nick Wingfield, The New York Times, 16 June 2017
“Amazon to Acquire Whole Foods Market” | BusinessWire, 16 June 2017
“Why Amazon Bought Whole Foods” | Derek Thompson, The Atlantic, 16 June 2017
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