Shares of Whole Foods Market rocketed 28 percent on Friday after Amazon said it plans to acquire the grocery store chain for $42 a share, in a deal valued at $13.7 billion.
Amazon’s offer represents a 27 percent premium to Whole Foods’ closing price on Thursday. With Whole Foods shares trading around Amazon’s offer price, investors appear to be speculating that another suitor could make a play for the grocery chain.
Whole Foods has been under pressure from activist investor Jana Partners and money manager Neuberger Berman, which have called on Whole Foods to sell itself. The investors have criticized Whole Foods for its poor performance, and have suggested the chain could be merged with another grocer.
So Amazon is going after groceries whole hog. It’s amazing to consider what the two together can do. Whole Foods CEO John Mackey is remaining and says Whole Foods’ values will not be compromised because of the deal.
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.
“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, Amazon founder and CEO. “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.”
“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,” said John Mackey, Whole Foods Market co-founder and CEO.
Whole Foods Market will continue to operate stores under the Whole Foods Market brand and source from trusted vendors and partners around the world. John Mackey will remain as CEO of Whole Foods Market and Whole Foods Market’s headquarters will stay in Austin, Texas.
Color me contrarian. On the news today I bought shares of WMT as it sold off steeply. Been lots of analytic articles of late (see “13 Reasons for WMT” in Seeking Alpha) on why WMT may be able to do battle with AMZN. Main reason is savvy Marc Lore who WMT picked up when it bought Jet.com. I just can’t resist a fellow who spells his first name in the French style!
Article CNBC about Amazon basically picking up Whole foods for free if you take into account thier increase in stock price today after the announcement.
Nothing really of substance in the article, but there is this which I found funny.
By the way, here’s the joke going around trading desks on Wall Street: “Jeff Bezos said to Alexa, ‘Buy me something from Whole Foods,’ and Alexa bought Whole Foods.”
Color me contrarian. On the news today I bought shares of WMT as it sold off steeply.
I also jumped on the opportunity, ZUZU3. I made 7% on on United Natural Foods Inc (UNFI) today as they sold off twice as much as any the other competitors in the food industry. Initially dropped 25%, now down at 11%. I’m happy with the quick 7%. I am always amazed how quick the market moves on information.
“Man, what a shot in the arm if you are among the hard luck group that is WFM shareholders.”
Not really. Whole foods is a great grocery brand. People don’t go to the cheapest restaurant possible, cheapest clothes possible, or buy the cheapest car possible; Whole Foods is often the only or cheapest place to buy certain things (or the best quality things). No illusions that they were going to take over the world, but they had a profitable niche and could have offered compounded growth for a while longer. I picked them up a hair under 30, so other opinions may differ. Obviously I am not a spokesman for the shareholders as a whole
I think of Blue Apron, who ships fresh food and a fancy recipe so you can cook a gourmet meal at home. With WFM in the fold, Amazon could easily replicate that, with or without a subscription. Just create a bunch of awesome meals and let people choose one and ship the ingredients.
The other thing about Amazon is they tend to develop products for internal use (and perfection), and then roll them out as services. They can easily do this with a pharmacy and I predict they will do it with a payroll system.
