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Sydnee Gatewood
Sydnee Gatewood
Articles (1628) 

Amazon to Acquire Whole Foods for $13.7 Billion

Deal is company’s largest to date

Taking a deeper plunge into the grocery space, Amazon.com Inc. (NASDAQ:AMZN) announced on June 16 it is buying popular grocery store chain Whole Foods Market Inc. (NASDAQ:WFM) for $13.7 billion.

Paying $42 per share, the deal is Amazon’s largest acquisition to date. While the company has been attempting to edge into the fresh grocery space for years through initiatives like its AmazonFresh Pick Up locations, it has failed to gain significant market share.

For its part, Whole Foods has been urged by activist hedge fund Jana Partners (Trades, Portfolio), the company’s second-largest shareholder with over 8% of outstanding shares, to consider a sale as it has struggled with declining same-store sales since 2015 as competition from smaller grocers has increased.

According to the terms of the deal, Whole Foods will continue to operate under its brand and maintain its suppliers. CEO John Mackey will retain leadership of the grocery store chain.

Mackey expressed his excitement for the deal, saying it is beneficial for shareholders and consumers.

“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,” Mackey said.

Amazon CEO Jeff Bezos also expressed his excitement, praising Whole Foods’ operations.

“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.”

The announcement caused other grocery stocks to plummet. Kroger Co. (NYSE:KR) fell 14%, Target Corp. (NYSE:TGT) shares fell 12%, Costco Wholesale Corp. (NASDAQ:COST) fell 6.2% and Wal-Mart Stores Inc. (NYSE:WMT) fell more than 6% after the announcement. Meanwhile, Amazon shares climbed nearly 3% to $989.27 and Whole Foods gained 27% to reach $41.99.

The deal is expected to close in the second half of this year.

Disclosure: I do not own any stocks mentioned in the article.

About the author:

Sydnee Gatewood
I am the editorial director at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg

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