Amazon Acquires Whole Foods Market for $13.7 Billion
In a relatively brief press release posted to its investor relations website this morning, Amazon sent shockwaves through the grocery food industry. Jeff Bezos' company announced that it had entered into a definitive merger agreement with Whole Foods Market. Amazon will effectively acquire the food store chain for $42 per share in an all-cash transaction that's valued at $13.7 billion, including the company'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,” Bezos, Amazon founder and CEO, said in the statement. “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 move by Amazon comes at a time that Whole Foods—ranked among the top 10 largest grocery chains in the country—has struggled mightily to remain relevant. It recently announced that it was abandoning a longtime goal of opening 1,200 stores in the U.S., and its comparable sales performance has been in the red for nearly two years running.
The company has been on a continuous slide since it's stock value peaked in 2013, and that's partly because of the rise of Amazon and the way it's been able to completely disrupt the supermarket model. So, rather than continue to slump quarter after quarter, Whole Foods has found a way to latch itself onto one of the fastest growing "food" brands in the industry in the hopes of riding their coattails to the top.
“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,” John Mackey, Whole Foods Market co-founder and CEO, said in the joint statement with Amazon.
According to the statement, Whole Foods Market will continue to operate under the Whole Foods Brand, and Mackey will remain on as the CEO based out of Austin, Texas. But moving forward, one would have to believe that Amazon has big plans for the national grocery chain. This acquisition comes not too long after Amazon announced their Amazon Go convenience store with no checkout lanes. This move could put them in a position to very-quickly scale that model on a national level. Or, with their food delivery service already in place, the company could essentially use every Whole Foods location as a local distribution center to expand their offerings and get food to consumers in a more-timely manner.
Whatever the plan is, this is a major step into the grocery market for a company that seems to be growing and expanding at an unthinkable (and perhaps unsustainable?) pace.