Amazon has announced something of a curveball acquisition today, as the internet giant revealed plans to snap up healthy supermarket chain Whole Foods Market in an all-cash deal worth nearly $14 billion.
Founded out of Austin, Texas in 1980, Whole Foods Market specializes in natural food that doesn’t have artificial preservatives, colors, flavors, or sweeteners.
“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 Amazon founder and CEO Jeff Bezos, in a press release. “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.”
Whole Foods Market has been a public company since 1992, and its shares hit an all-time high of around $65 in 2013. Its stock has been hovering around the $33 mark for the past few years, however, with the shares closing at $33.06 yesterday. Amazon is offering $42 per share for the company, a premium of around 27 percent on yesterday’s closing price, for a total value of $13.7 billion.
“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,” added Whole Foods Market’s cofounder and CEO, John Mackey.
The deal still has to attain shareholder approval, of course, as well as passing the usual regulatory and closing conditions, which the duo expect will happen in the second half of 2017. Assuming the acquisition is seen through to completion, Whole Foods Market will continue as is under its own brand, with Mackey remaining CEO.
Online books to brick-and-mortar groceries
Amazon has long transcended its roots as an online bookstore and today offers everything from video-streaming services to on-demand restaurant deliveries. While its decision to effectively merge with Whole Foods Market may seem like an oddity on the surface, it’s not entirely out of line with Amazon’s recent initiatives in the grocery realm.
In fact, Amazon has offered a grocery delivery service for a decade already. First launched in beta back in 2007 in Mercer Island, Washington, AmazonFresh later expanded across the U.S. into Seattle, San Francisco, Los Angeles, San Diego, New York, and Philadelphia, among many other U.S. cities. Last year, it also launched in London, which represented its first international market. Whole Foods Market, as it happens, also operates seven stores in the U.K. capital.
AmazonFresh delivers a range of domestic goods and produce — including fruit, vegetables, and meat — on the same day or the next day, depending when they’re ordered. The service is available to $99/year Prime members, who must pay an additional $15 per month to access the grocery delivery service.
Amazon has also been pursuing own-brand brick-and-mortar stores, including bookstores, the most recent of which opened in New York City. And late last year Amazon debuted its own grocery store in Seattle, as the company sought to shine a light on a futuristic new “checkout free” shopping experience.
So Amazon has made no secret of its aspirations in the grocery realm. But why buy Whole Foods Market? Well, the internet behemoth is every bit as much a delivery and logistics company as it is an online marketplace for buying USB memory sticks, books, and cheap mobile phones. And as a result of this acquisition, Amazon is entering the grocery fray in a major way. As things stand, Whole Foods Market offers one-hour deliveries via Instacart, but once this acquisition is complete, you can bet your bootlaces that Amazon will be placing groceries front and center within its online ordering and delivery network.
This acquisition also helps highlight the growing convergence between the offline and online worlds. Last August, Walmart revealed it was buying fledgling online retailer Jet.com for $3 billion in cash in what many viewed as a direct swipe at Amazon. Now, Amazon is hitting back by buying Whole Foods Market outright, grabbing a direct conduit into more than 400 stores across North America and the U.K., which should lead to some interesting offline/online cross-pollination.
Finally, this acquisition shows that to compete effectively in the grocery market, you need a strong, local on-the-ground presence — and that’s what Amazon now has with Whole Foods Market.