Published: Tue, June 20, 2017
Markets | By Lucia Cruz

Amazon to acquire Whole Foods in $13.7 billion deal

Amazon to acquire Whole Foods in $13.7 billion deal

And that quote came just before a jaw dropping announcement Friday morning: Amazon is buying Whole Foods and its 460 stores for $13.7 billion.

Online retail giant Amazon is making a bold expansion into physical stores with a $13.7 billion deal to buy Whole Foods, setting the stage for radical retail experiments that could revolutionize how people buy groceries and everything else. Amazon would be dealing with perishable food, non-perishables, and consumer products.

Charlie O'Shea, a Moody's lead retail analyst, told the Associated Press news agency that the deal could be "transformative, not just for food retail, but for retail in general". Kroger, the Ohio-based grocery chain, also could make a run at Whole Foods, though its stock was torched today, dropping nine percent after the Amazon-Whole Foods deal was announced. Target tumbled by 10 percent and Walmart was down by 6 percent.

Americans have been slowly moving toward online grocery shopping.

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.

Some analysts on Wall Street see the acquisition as the online retailer's big entry into the food business.

"We love Amazon, and we love Whole Foods".

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Amazon will gain a footprint of 456 supermarket stores in North America and Britain with the acquisition of Whole Foods, boosting its delivery capacity and allowing it to compete directly with USA chains such as Kroger Co and Albertsons LLC.

Amazon, meanwhile, has been expanding its reach in goods, services, entertainment - and groceries.

"I think that this takes all of the pressure off Whole Foods and gives Whole Foods the opportunity to revitalize that business and of course it stems the criticism from all of these activist investors", said Neil Saunders, managing director of GlobalData Retail in NY. "They're greedy bastards, and they're putting a bunch of propaganda out there, trying to destroy my reputation and the reputation of Whole Foods, because it's in their self-interest to do so". Ranked 28th in the world, Whole Foods Market has carved a niche for itself in terms of supplying natural and organic foods to shoppers, and will now become a part of a major force in online retail business.

And Amazon could turn to dealmaking again.

It's also been testing automation technology at a Seattle convenience store that's now open only to Amazon employees. For example, Walmart has a "Scan and Go" pilot at one store where consumers can use an app to scan items as they shop and then pay using their phones, according to the JLL report. The shopper's Amazon account gets automatically charged. "It's probably like the ideal match right", Whitney Winchester said. Both companies said there will be no layoffs, but did not respond to other questions about Amazon's plans for Whole Foods.

About 450: Number of Whole Foods stores across the country. 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. It seemed unlikely that Instacart would hold on to its agreement to deliver for Whole Foods, soon to be owned by its goliath rival. One day, these stores might even serve as launch centers for Amazon's delivery drones. Although Amazon's plans for Whole Foods is not clear, the acquisition has some wondering what will happen to the chain's existing stores. He's gonna stay put as head honcho and the firm will remain based in Austin, Texas. This is now the internet retailer's largest deal ever, as Amazon is preparing to make its biggest incursion into the brick-and-mortar retail sector of the economy.

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