Amazon is Buying Whole Foods for $13.7 Billion

It’s worth noting that Amazon is going to pay $13.7 billion for buying Whole Foods, which is an organic grocery chain. One of the largest online retail giants made this announcement on Friday. According to the terms of the deal, Amazon will have to pay $42 per share in cash. As a matter of fact, it is 27% higher if compared with Thursday’s closing price.

Thus, the electronic commerce and cloud computing company says the name of Whole Foods stores will remain the same. In addition to that, it will be considered a separate unit of Amazon. Further, the headquarters of the organic grocery chain will be in Austin, Texas as it was previously. John Mackey, who is the CEO of the Whole Foods will preserve his job position.

 

About Whole Foods Market

Actually, the foundation of the Whole Foods goes back to 1978. It happened in Austin, Texas. Among the founders of the organic grocery are John Mackey, Renee Lawson Hardy, as well as Craig Weller and Mark Skiles. It’s worth pointing out that the original store opened in 1980. At that time the company only had about 19 employees. Later it had a huge success and could win a leading position in the market.  Today the organic grocer can boast with over 465 stores throughout North America and the United Kingdom. However, during recent years the organic grocery company experienced sliding sales. As a consequence, Whole Foods lost a fifth of its value during the previous three years. The reason is that it had to deal with Kroger and Wal-Mart, which increased their healthy grocery offers significantly.

Why is Amazon making a bet on the food business?

Thus, with this step Amazon has shown its interest in healthy groceries. The company has established its own delivery service, known as AmazonFresh. Well, Amazon is attempting to put into practice ‘’click and collect’’ model. In this way, customers have the opportunity of purchasing groceries online.

Furthermore, a huge online retailer’s decision to obtain Whole Foods shows the financial power of the Jeff Bezos company. It is true that the company’s market value is larger if compared with twelve giant general retailers. According to Bezos, a lot of organic food lovers prefer Whole Foods, as they enjoy using healthy food.

Mackey says it is a good opportunity that may help increase value for Foods Market’s shareholders. He also adds such a partnership will extend the company’s mission and provide their customers with highest quality, as well as convenience and innovations.

It’s essential to mention that Amazon’s shares increased by 3%. It occurred on Friday morning. Additionally, the shares of the organic grocery Whole Foods rose 27%.  On the contrary, the stocks of some grocery giants decreased significantly. That’s why, a lot of grocery companies were astonished because of this news, as it means that their low-cost competitor Whole Foods started improving its position in the market.

In conclusion, this deal still needs shareholder approval. Most probably, it will close during the second half of 2017.

 

 

 

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