Shoppers may see big changes after Amazon buys Whole Foods
Jun 20 2017
Walmart, which has the largest share of the USA food market, has been working on lowering prices, while Target has been struggling to turn around its grocery business.
Shares of Amazon were trading at $988.52 in pre-market trading, a 2.53% jump, while Whole Foods shares were down 6.74% at $33.06.
Amazon is paying $42 per share for Whole Foods, which is a 27 percent premium from Thursday's night close. And Whole Foods shares climbed 29 percent to $42.68 Friday - more than the $42 deal price - indicating investors expect another bidder may emerge.
A former grocery expert at Amazon predicted that the chain, nicknamed "Whole Paycheck", would add a selection of discounted food and build out non-grocery areas within stores, particularly for pharmacy and Amazon devices.
The Whole Foods purchase improves Amazon's odds and speeds up the timeline.
When Amazon made a decision to approach Whole Foods last month, it picked Goldman for advice. "That is the reality today at Amazon, and it will no doubt become the reality at Whole Foods", said UFCW President Marc Perrone in an email.
Amazon has been looking at shop layouts that could allow traditional in-store purchase, online ordering with on-site pickup, and home delivery, using store warehouse space as a distribution point, Ladd said. "We are seeing very early signs here across AMZN Bookstores and the Amazon Go store in Seattle", Anmuth wrote in a note obtained by CNBC. The company is known for its organic produce and other health products.
Another analyst, Phil Lempert of Supermarketguru.com, said the deal is a blow to grocers across the country, both big and small. John Mackey will remain as CEO of Whole Foods Market and Whole Foods Market's headquarters will stay in Austin, Texas.
In Whole Foods, Amazon is acquiring a company that has recently come under pressure from investors for its lagging performance.
When Jana Partners LLC in April said it had raised its stake in Whole Foods in April and pushed for a sale of the company, Whole Foods interviewed several investment banks to hire an adviser to help defend against the activist hedge fund.
Excluding debt, the deal is valued at $13.39 billion.
Whole Foods is a favorite by health nuts and the average shopper alike.
The deal still needs to gain regulatory approvals and is subject to a Whole Foods shareholders vote.
The online giant past year declared its plans to open a physical grocery store called Amazon Go, a market without cashiers where consumers would be automatically charged based on the items they placed into their shopping bags. It has expanded from a book seller into a merchant of almost all consumer products, as well as producing videos.
When Amazon approached, Whole Foods turned again to Evercore. However, Whole Foods does not have access to Instacart's financial numbers and analytics. And it should be able to bring cost-cutting technologies, such as robots to move inventory around, while the company gets a better picture of customers by marrying data from Amazon and Whole Foods' loyalty programs.