On Friday morning, Amazon (NASDAQ: AMZN) announced a knew deal—worth nearly $14B—as the e-commerce giant aims to buy the organic, all-natural food retailer, Whole Foods (NASDAQ:WFM). In this all-cash deal, the grocer will continue to operate under its original name, holding a discrete division of the tech company. Equivalently, Whole Foods Chief Executive John Mackey will hold his position at the company’s existing headquarters in Austin, TX.
To comment on this merger, Amazon (NASDAQ: AMZN) founder and Chief Executive Jeff Bezos said, “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 (NASDAQ:WFM) has been satisfying, delighting and nourishing customers for nearly four decades —they’re doing an amazing job and we want that to continue.”
Now, you may recall that in December of 2016, a report claimed that Amazon had been planning to open at least 2,000 self-branded grocery stores. This project, then, is either the realization of that promise or an off-shoot. For reference sake, then, in September of 2017, Whole Foods tallied 456 outlets, employing approximately 87,000 people.
Obviously, shareholders are going to benefit from this deal. The merger will give Whole Foods (NASDAQ:WFM) shareholders a 27 percent price premium; the company now has a value of $42 per share. A jump like that, though, is making its mark throughout the market, with many grocery chains falling [at least] 10 percent as a result. Even mall anchor stores like Target and super-retailers like Walmart are feeling the weight, down 9.2 percent and 6.1 percent, respectively.
Mackey goes on to say, “This partnership presents an opportunity to maximize value for Whole Foods Market’s shareholders. At the same time extending our mission and bringing the highest quality, experience, convenience and innovation to our customers.”
In addition, Moody’s lead retail analyst Charlie O’Shea remarks that this transaction is not only transformative for food retail, but for the whole of the retail industry overall.
He comments, “Implications ripple far beyond the food segment, where dominant players like Walmart, Kroger, Costco, and Target now have to look over their shoulders at the Amazon train coming down the tracks.”