Amazon.com Inc is buying Whole Foods Market Inc in a deal valued at about $13.7 billion, including debt, as reported by Reuters. Amazon and Whole Foods expect to close the deal during the second half of 2017. The deal comes a month after Whole Foods announced a board shake-up and cost-cutting plan amid falling sales. The investors have criticized Whole Foods for its poor performance, and have suggested the chain could be merged with another grocer. The grocery store operator was also under pressure from activist investor Jana Partners.
“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,” John Mackey, Whole Foods’ CEO, said in a statement.
Here are 5 things to know about the deal:
1. The $42 per share offer represents a premium of 27 percent to the upmarket grocery chain’s Thursday close. Excluding debt, the deal is valued at $13.39 billion, based on 318.9 million diluted shares outstanding as of April 9.
2. Staples Retail Index fell 5.0 per cent after Amazon announced the acquisition of the grocery chain, famous for selling organic products. Shares of Whole Foods Market rocketed 28 percent on Friday and trading in the scrip was halted at $32.77 in premarket trading, while Amazon’s shares were up 0.5 percent at $969.
3. Reports that the e-commerce giant is buying Whole Foods sent grocery stocks reeling on Friday. Kroger sank nearly 16 percent before the close of trade, Supervalu dropped 11.5 percent, Costco dropped 6.5 percent and Sprouts Farmers sank 9.2 percent.
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4. The grocer, founded in 1978, will continue to operate stores under the Whole Foods Market brand. John Mackey will continue as chief executive of Whole Foods, and the company’s headquarters will remain in Austin, Texas.
5. Whole Foods had been struggling to differentiate itself from competitors for some time now. In addition to other natural and organic grocers, it has cited pressure from restaurant chains, meal-delivery companies and traditional supermarkets such as Kroger. The grocery chain had also been facing increased pressure from rivals, including European grocery chain Lidl, which is planning to enter the East Coast market, along with Aldi and Trader Joe’s.