Amazon Contemplated Buying Whole Foods

According to emerging reports, Amazon considered a Whole Foods Market takeover last fall — but ultimately decided not to pursue a deal. The potential move came as Amazon continues to look for ways to bolster its grocery business, though according to an unnamed source, the discussion never went beyond the “talk” phase and no concrete plan was made.

Whole Foods would have been a massive purchase — even by Amazon’s lights — given its current market valuation at $10.7 billion. By comparison, Amazon paid $1.2 billion to buy out Zappos.  But Whole Foods would kick Amazon’s grocery ambitions into high gear more or less overnight — and offer the side benefit of sidelining Instacart. Instacart competes directly with Amazon on grocery delivery — and delivers out of Whole Foods.

The news comes as reports are surfacing that activist investor Jana Partners has acquired a stake in Whole Foods and has begun urging the firm to consider a sale.  The markets, incidentally, have liked all this speculation — Whole Foods shares jumped on the announcement that Jana had taken a stake and jumped again when reports began to surface that Amazon has been a potential buyer.

Jana’s list of potential bidders includes Amazon, as well as traditional grocery chains such as Kroger Co. and Albertsons Cos. There is also a thought that a PE player could take Whole Foods private and help it course correct without the pressure of the public markets.

Will Whole Foods get itself a buyer?

“They’ve struggled, but it’s a strong brand,” noted Edward Jones analyst Brian Yarbrough.

Jana currently has an 8.3 percent holding in Whole Foods since taking its stake on Monday. The activist investor has promised a shake-up and has already retained an army of executive consultants to help size up the company’s problems. The group includes author and food activist Mark Bittman, a former columnist for the New York Times.