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Published: Tue, June 20, 2017
Economy | By Melissa Porter

Amazon.com to acquire Whole Foods at US$42 per share

Amazon.com to acquire Whole Foods at US$42 per share

The all-cash transaction is valued at $13.7 billion, with Amazon assuming Whole Foods' debt.

Amazon is buying Whole Foods in a stunning move that gives it hundreds of stores across the US - a brand-new laboratory for radical retail experiments that could revolutionize the way people buy groceries.

A crowded local grocery market became more interesting - and probably more competitive - as online retail powerhouse Amazon announced Friday that it will buy organic foods specialist Whole Foods, which now has stores in Washington Twp., Mason and Cincinnati.

More hubs means quicker and fresher delivery, which will bolster Amazon's existing grocery delivery service, AmazonFresh. Note, though, that one of its investors as well as partners is Whole Foods, either shaping Amazon to be a shareholder or Instacart as an acquisition target itself.

The deal has the possibility to be "transformative", Moody's lead retail analyst Charlie O'Shea said in a note, "not just for food retail, but for retail in general".

Companies in the food business, he adds, are also under attack from another recent entry into the USA grocery pace, German grocer Lidl. "That is the reality today at Amazon, and it will no doubt become the reality at Whole Foods".

The almost $14 billion deal is the largest purchase in Amazon's history. Kroger sank 11.48 percent, while Costco dropped 5.64 percent.

Americans have been slowly moving toward online grocery shopping.

"But these guys just want to sell us because they think they can make forty or fifty percent in a short period of time".

Whole Foods, which will keep operating stores under its name, said in an email to customers, that it will maintain the same standards under Amazon, including bans on artificial flavors and colors and antibiotics in hens producing its eggs.

In October, reports surfaced that Amazon was planning to build its own grocery stores. On Friday, WalMart announced it is buying men's online clothing retailer Bonobos for $310 million. But he says he was going to ask a Whole Foods cashier about the Amazon deal and then hesitated, unsure whether the workers were as excited.

Whole Foods has posted seven straight quarterly sales declines at established stores and recently overhauled its board of directors in the face of pressure from activist hedge fund Jana Partners LLC.

Expanding into the grocery market would not only bring profits to Amazon but a room for great expansion. The online giant has made no secret of its plans to be a physical retail giant, too, and it's already started doing grocery deliveries. The acquisition would add Whole Foods' 87,000 employees to Amazon's payroll, which as of the end of the first quarter had 351,000 people.

"They (Amazon) always try to offer the best price, which is good for the customer, but not good for the brand", Motkin said. The deal will grant Amazon with control over more than 400 stores, integrating the stores with technology. Pachter said Amazon might get customers over those fears if they know the delivered items are the same as those they would find at the local store. In order for Amazon to get the volume growth they are looking for, fresh foods has to be part of the equation. "It's probably like the flawless match right", Whitney Winchester said.

Both companies said there will be no layoffs, but they did not respond to other questions about Amazon's plans for Whole Foods.

The organic grocer, which was founded in 1978, would continue to operate under its existing brand. The stock is up more than 31% so far this year.

That's frustrated investors saddled with a drop of almost 43 percent from the start of 2014 through Thursday, while the rest of the stock market marched 32 percent higher to record heights.

A Whole Foods Market is pictured in the Manhattan borough of New York City, New York, U.S. June 16, 2017. They demanded changes. Founder and CEO John Mackey told Texas Monthly that they were greedy bastards.

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