Published: Sat, June 17, 2017
Money | By Armando Alvarado

Amazon to buy Whole Foods for $13.7 billion

Amazon to buy Whole Foods for $13.7 billion

Amazon will acquire upscale USA grocer Whole Foods Market, known for its pricey organic options, for $13.7bn, the companies announced yesterday, in a deal that underscores the online retailer's growing influence.

The deal by Amazon, a proven retail disruptor, is seen as a threat to supermarket chains and grocers, given the company's readiness to sacrifice margins for market share.

Wall Street closed slightly lower Friday after a major deal between Amazon and Whole Foods dragged down stocks.

Despite Amazon's seemingly incongruent move, investors applauded the acquisition.

Target tumbled $3.79, or 6.8 percent, to $51.67. "Amazon sees that industry changing significantly - and they see that people don't necessarily go to the grocery store anymore". Kroger fell 13.4%. SuperValu was down 16%. The companies expect the deal to be completed in the second half of 2017.

Biotech company Celgene was upgraded by Leerink Partners to Outperform, and its stock jumped over 1 percent. Amazon had established a tentative physical footprint with a small number of Amazon Book Stores.

He added that Whole Foods was faced with same-store sales declines for six straight quarters and "must have concluded that this is the best chance to turn that around".

Bond prices rose. The yield on the 10-year Treasury note fell to 2.16 per cent from 2.17 per cent.

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The Amazon-Whole Foods combination, expected to close by the end of the year, could put even more pressure on those chains and other big grocery sellers. Discounters, like Aldi, and other online grocers have made their way in, too.

But in February, Whole Foods said it no longer saw the potential for expanding its flagship chain to 1,200 locations, up from about 460 in the United States, Canada and the United Kingdom.

On the Whole Foods Market, Bezos said million love this food chain giant as they offer natural and organic food.

We want to assure you that Amazon shares Whole Foods Market's deep commitment to quality and customer service.

Mackey will stay as CEO, and the headquarters will stay in Austin, Texas. John Mackey, Whole Foods' outspoken co-founder, will continue to run the business - providing a lifeline to the embattled executive after a fight with activist investor Jana Partners. But if customers know that what they are getting is the same as what they'd get at the local store, they are more likely to try it out.

"Amazon's got its tentacles everywhere and that's another place to go", said Bruce Bittles, chief investment strategist at R.W. Baird & Co.

"They're under a lot of pressure to create shareholder value and turn back to a growth story", said Greg Wank, head of the Food and Beverage Industry Group at New York-based accounting and consulting firm Anchin Block and Anchin.

Amazon is already playing with innovative ways to make grocery store runs more convenient.

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