Amazon to buy Whole Foods for $13.7bn
Online retail giant Amazon is buying
Whole Foods in a $13.7bn (£10.7bn) deal that marks its biggest push
into traditional retailing yet.
Amazon, which has been experimenting with selling groceries, will buy the upmarket supermarket for $42 a share.
Investors greeted the deal as game-changing for the industry, sending shares of rival grocers plunging.
But Whole Foods, which had been under pressure, climbed.
Founded in 1978 in Texas, Whole Foods was a pioneer of the move towards natural and organic foods.
It has grown to more than 460 stores in the US, Canada and the UK, and employs about 87,000 people.
Amazon
founder and chief executive Jeff Bezos said: "Millions of people love
Whole Foods Market because they offer the best natural and organic
foods, and they make it fun to eat healthy.
"Whole Foods Market
has been satisfying, delighting and nourishing customers for nearly four
decades - they're doing an amazing job and we want that to continue."
'Maximise value'
Whole
Foods has faced dissatisfaction from investors, amid falling same-store
sales and increased competition. Last month, the company named a new
chief financial officer and new board members.
In April, activist investor Jana Partners called the firm's shares undervalued, noting "chronic underperformance".
The
price being paid by Amazon marks a 27% premium to the level Whole
Foods' shares closed at on Thursday. The $13.7bn value includes
assumption of the grocer's debt.
The takeover deal is expected to
be completed in the second half of the year, pending approval by
shareholders and anti-trust regulators.
Whole Foods boss John
Mackey 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."
The Whole Foods brand will continue. Mr Mackey is expected to stay on as chief executive.
'Inherent logic'
Whole Foods stock immediately soared almost 27% on the news.
Amazon climbed 3.4%.
Neil
Saunders, managing director of GlobalData Retail, said the deal should
give the grocer financial breathing room, while making it more
competitive online and improving its supply chain logistics.
The takeover also makes Amazon an instant player in the grocery industry, which it has been eying for some time.
"There
is an inherent logic in the move which, in our view, brings benefits to
both businesses," Mr Saunders wrote, describing Amazon as a
"white-knight" that has come to the grocer's rescue.
'Potentially terrifying'
But he had a less sanguine view of the effect on rivals, which took a beating in morning trade.
Kroger fell more than 14%, Target plunged more than 10% and Costco Wholesale Corp. dropped nearly 7%.
Walmart, which announced its own $310m deal to acquire the online clothing company Bonobos, slid 6%.
Mr Saunders said the deal is "potentially terrifying" for other grocers.
"Although
Amazon has been a looming threat to the grocery industry, the shadow it
has cast has been pale and distant," Mr Saunders wrote. "Today that
changed."
BBC
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