It has been confirmed that online retail giant, Amazon, will be buying the popular upmarket grocery store chain, Whole Foods Market, in an all-cash $13.7 billion (£10.7 billion) deal. They will be buying it for $42 per share. The price being paid by Amazon marks a 27% premium to the level that Whole Foods shares closed at on the stock market last Thursday, and includes the assumption of the grocer’s debts.
Investors see the deal as a game-changer for the industry. Amazon is the fourth biggest business in America, and accounts for 43% of all online sales in the country. The takeover deal has resulted in shares of rival grocers dropping dramatically. In comparison, Whole Foods shares climbed by 29% – despite having been otherwise under pressure.
The move to buy Whole Foods Market comes after Amazon’s launch of their Fresh delivery service, which began in America 10 years ago and moved to the UK in 2016 after signing a wholesale deal with British supermarket chain, Morrisons. The new deal with Whole Foods Market is the second biggest takeover deal in Amazon’s history, and is expected to be completed by the second half of 2017, subject to approval from shareholders and anti-trust regulators.
Until now, Amazon has only held less than 0.5% of the grocery spending share in America, according to GlobalData, and has had limited impact. This is all set to change.
Whole Foods Market first opened in Austin, Texas, on 20th September 1980 with only 19 staff. It had all begun in 1978 when 25-year-old college dropout John Mackey and 21-year-old Renee Lawson (Hardy) borrowed $45,000 from family and friends to open the doors of a small natural foods store called SaferWay in Austin. Two years later, they partnered with Craig Weller and Mark Skiles to merge SaferWay with their Clarksville Natural Grocery, resulting in the opening of the original Whole Foods Market.
The organic grocery store chain now has more than 460 stores across America, Canada (a market they entered in 2002) and the United Kingdom (which they entered in 2004). As of May 2017, they employ approximately 87,000 people and are valued at $9.9 billion by Forbes. Their sales are at $15.81 billion. Whole Foods Market is also ranked at #187 for America’s best employers, and #564 for sales.
Founder and chief executive of Amazon, Jeff Bezos, commented on the deal, saying: “Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy… 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.”
In making this buy, Amazon has become an immediate player within the grocery industry – moving central from the fringes of Amazon Fresh. There is much talk of how technology will be introduced to the stores, along with merged supply chains, lower prices, and cross-sales of Amazon products.