SEATTLE — Amazon has agreed to acquire Whole Foods Market, Inc. for $42 per share in an all-cash transaction valued at approximately $13.7 billion, including Whole Foods Market’s net debt.
|John Mackey, c.e.o. of Whole Foods Market|
Whole Foods Market will retain its headquarters in Austin, Texas, and John Mackey will remain chief executive officer. The retailer will continue to operate stores under the Whole Foods Market brand and source from established vendors and partners around the world, the company said.
The transaction is expected to close during the second half of 2017 and is subject to approval by Whole Foods Market shareholders, regulatory approvals and other customary closing conditions.
For Amazon, the deal would expand the e-commerce giant’s footprint into brick-and-mortar retail. It has been rumored for some time that Amazon has been considering different retail formats with a focus on consumer packaged goods.
|Jeff Bezos, founder and c.e.o. of Amazon|
“Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy,” said Jeff Bezos, founder and c.e.o. of Amazon. “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.”
In April, Whole Foods Market shares jumped 10% in one day following news that investor Jana Partners L.L.C. had acquired an 8.3% share in the natural grocery chain. In a filing with the Securities and Exchange Commission Jana Partners said it intended to push the company’s board of directors and management to consider strategic options, such as a potential sale.
Beleaguered by heightened competition and six quarters of same-store sales declines, Whole Foods had recently cut its full-year sales and profit forecast and revealed plans to close 9 of its 469 stores in the recent quarter. At the end of last year, Whole Foods co-chief executive officer Walter Robb departed the company, as co-founder John Mackey became the sole c.e.o.
Of the Amazon deal, Mr. 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.”
Amazon has become so pervasive in retail that 42% of U.S. consumers made a purchase on Amazon.com last year, according to The NPD Group. Comparatively, 20% of Americans shopped at a Whole Foods Market store last year, which was down 3 percentage points from the prior year. The deal would give Amazon control of Whole Foods' stores, most of which are located in affluent neighborhoods, solving the "last-mile" delivery challenge for fresh groceries, which may be Amazon's biggest barrier in that segment of the marketplace, The NPD Group said.
|David Portalatin, vice-president, industry analysis, Food, The NPD Group|
“Fresh foods are the final frontier for Amazon," said David Portalatin, vice-president, industry analysis, Food, The NPD Group. "And figuring out how to get it to your front door is the ultimate in convenience for consumers. In order for Amazon to get the volume growth they are looking for, fresh foods has to be part of the equation. This deal gives them credibility with consumers and a major foothold in that space.”