Amazon.com has announced their intent to purchase Whole Foods Markets in a $13.7 Billion Dollar Deal
Amazon is valuing Whole Foods stock at $42 a share in an all-cash transaction, well over yesterday’s closing price of $33.
“Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy,” said Jeff Bezos, Amazon founder and CEO. “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.”
“This partnership presents an opportunity to maximize value for Whole Foods Market’s shareholders, while at the same time extending our mission and bringing the highest quality, experience, convenience and innovation to our customers,” said John Mackey, Whole Foods Market co-founder and CEO.
Whole Foods Market will continue to operate stores under the Whole Foods Market brand and source from trusted vendors and partners around the world. John Mackey will remain as CEO of Whole Foods Market and Whole Foods Market’s headquarters will stay in Austin, Texas.
Completion of the transaction is subject to approval by Whole Foods Market’s shareholders, regulatory approvals and other customary closing conditions. The parties expect to close the transaction during the second half of 2017.
The chain has been struggling for years as regional markets (such as Fred Meyer) have added more natural/organic goods at lower prices. Though they have made many changes to pricing structure in an attempt to get customers in the door, they have a higher overhead than most markets, as they tend to have markets in more expensive real estate than other chains. It doesn’t help that, in many consumers minds, they are still trying to shake off the moniker “Whole Paycheck” that spread across the country years ago when their prices were higher. I had a conversation about the difference in prices between Whole Foods and New Seasons Markets this week, and we both agreed, New Seasons is now so much more expensive than Whole Foods, we have both stopped shopping there, even though we have to pass New Seasons to get to other markets.
What will this mean for other chains? Investors don’t seem upbeat – Target is down 7.7%, Walmart 5%, Kroger (parent of Fred Meyer) is down 12%. Grocery chains run by notoriously small margins, and the idea of the power of Amazon.com breathing down their backs is going to make them very nervous, especially when it comes to grocery delivery, which is a model stores are having a difficult time convincing consumers to use. With 431 new local warehouse locations, WF is going to have a strong foothold in the business, all powered by its existing infrastructure.
So first they kill off local bookstores, and once they have pretty much done so, they open their own. Now they may have a similar effect on grocery stores. I’ll miss going to Whole Foods.
grapedog says
New Seasons really needs to monitor their store staffers as the service level goes down as the prices go up. This will be another reason why customers will go elsewhere. I’ve had really helpful/good experiences as Whole Foods (bakery counter, deli counter, floor staff, etc) and an annoying string of bad experiences at New Seasons by employees who have lost the “spirit” of the store chain and are simply doing their job.