Amazon to Acquire Whole Foods Market for $13.7 Billion

Amazon to Acquire Whole Foods Market for $13.7 Billion

Amazon to Acquire Whole Foods Market for $13.7 Billion

Amazon.com, the online retail giant, made a major move into the brick and mortar space Friday, announcing that it would buy Whole Foods Market in a deal valued at $13.7 billion.

Going full throttle into groceries by announcing a $13.7 billion deal for Whole Foods on Friday, Amazon gets the advantage of using the stores as mini-distribution hubs to deliver items to customers.

But Whole Foods, which has been feeling the heat to bolster its stock for more than a year, has a new owner with cash to burn, significant technological expertise, and a willingness to invest aggressively in a quest for dominance of a brand new sector.

Online delivery of groceries so far has been tough for any company to pull off because of customers' concerns about the quality of meat and produce, Wedbush Securities analyst Michael Pachter said.

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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".

Supermarkets now have to compete for prices with a retailer like Amazon, aside from each other and grocers like Walmart and Target, and Amazon has the financial capacity to price aggressively. 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.

The Journal said buying Whole Foods allows Amazon to quickly grab a bigger portion of the estimated $674 billion US market for edible groceries, according to consulting firm Kantar Retail. The natural foods retailer helped start a trend toward natural and organic foods, but its stock has struggled in recent years and recently the company shook up its board and said it would cut costs. Whole Foods will keep operating stores under its name.

Several workers expressed relief and happiness about the planned sale, which came as Whole Foods faced pressure from hedge fund investor Jana Partners to improve results.

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Whole Foods, founded in 1978, saw its stock peak in 2013 at $65.24. Amazon and Whole Foods expect to close the deal during the second half of 2017.

Now Amazon will take on grocers like Wal-Mart and Kroger.

The company also has been testing sensors at a convenience store in Seattle to track items as shoppers put them into baskets or return them to the shelf. In order for Amazon to get the volume growth they are looking for, fresh foods has to be part of the equation.

The New York Times says Amazon wants to, or already has created plans to expand its e-commerce business into physical retail. The stores could teach cooking skills, hold classes and educate about food. The website cited an opportunity for the company to buy another entity with the logistics expertise to fill that said gap.

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Peter Belanger of Newington calls himself an "Amazon person" who uses two Kindles, but said he and his wife will not likely shop the internet for food.

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