Amazon Buying Whole Foods For Almost $14B

Sometimes the rumor mill gets it right. Or almost right anyway

According to the latest reports out this morning – Amazon.com will acquire Whole Foods Market in a $13.7-billion cash deal that is expected to close during the second half of 2017. The deal values Whole Foods at $42 a share, a 27 percent premium over its closing price Thursday.

The merger will see Whole Foods co-founder and CEO John Mackey remain as the head of the organic grocery chain, which reportedly will continue to operate independently.  Whole Foods’ corporate headquarters will remain in Austin, Texas.

Whole Foods, which has more than 460 stores, has struggled in recent years as an increasing number of specialty and mainstream grocery purveyors have encroached on the organic grocery territory – often offering lower-priced alternatives to the goods on offer at “Whole Paycheck.”  Whole Foods’ stock price has been nearly cut in half since 2013, and same-store sales have persistently fallen since September 2015.

Despite those factors, Mackey strongly emphasized the partnership aspect of the Amazon deal – as opposed to the perhaps more accurate takeover aspect.

“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,” he noted in a release on the news.

Rumors of an Amazon-Whole Foods partnership have been swirling since mid-April. Those reports indicated that Amazon had considered a Whole Foods Market takeover last fall — but ultimately decided not to pursue a deal.

Acquisition rumors have been following Whole Foods since activist investor Jana Partners acquired a stake in the firm and began urging a sale. Investors, incidentally, seemed to like that suggestion: Whole Foods shares jumped on the announcement that Jana had taken a stake and jumped again when reports began to surface that Amazon could be a potential buyer.

As for Amazon – the move advances any number of ecosystem-relevant goals for the eCommerce giant.  Expanding into brick-and-mortar retail is clearly one of them – with the opening of Amazon bookstores and convenience food stores in selection locations. Amazon has also made a concerted effort to break into grocery – given the massive amount of consumer spending it attracts – with Amazon Fresh (among other efforts). And while those efforts have gained traction, they also face hurdles in consumer interest and delivery.  Plus the economics of Amazon Fresh delivery only work in urban areas – the distances and logistical complexities make it a less-natural fit in the suburbs.

This move certainly opens up a lot of doors for Amazon. It has  been moving into the food sector, with services like AmazonFresh. But this move also gives the eCommerce retail giant immediate brick-and-mortar access to a certain type of consumer with disposable income. Many companies Amazon has acquired have continued to operate independently, but will we start seeing Kindles and Amazon Echos popping up at Whole Foods?

Shockingly, Amazon’s Founder and CEo Jeff Bezos didn’t say in his released remarks, though he is clearly a Whole Foods fan.

“Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy,” Bezos said. “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.”

Continue – and continue to evolve, we suspect.  We’ll keep you posted on the more that is sure to come.