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Why is Amazon buying Whole Foods? All you need to know

June 16, 2017 2:10 PM
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Why is Amazon buying Whole Foods? All you need to know

Amazon has confirmed plans to buy Whole Foods in the company’s biggest acquisition to date.

On Friday, June 16, Amazon Inc. confirmed that it would pay an incredible $13.7 billion USD to purchase Whole Foods Market Inc.

The deal, which is Amazon’s biggest buyout ever, will see the company pay $42 in case per share of Whole Foods.

It has also been confirmed that John Mackey, the co-founder and CEO of Whole Foods, will continue to run the business.

The deal trumps Amazon’s previous biggest acquisition, when the retail giant bought out Twitch Interactive Inc. for $970 million in cash back in 2014.

Amazon CEO Jeff Bezos says "millions of people love Whole Foods" and Amazon "wants that to continue"

Whole Foods Market Inc. is a major US-based supermarket chain that operates across 431 locations through the USA, Canada, and the United Kingdom.

The company opened back in 1980 in Austin Texas, and now has 91,000 employees globally.

Whole Foods is currently publicly traded on the NASDAQ, and became a Fortune 500 company in 2005. It’s also the 30th largest retailer in the United States, based on 2014 revenue.

At the time of writing, Whole Foods Market Inc.’s market capitalisation is $12.53 billion. That’s the value of a single share combined by the total number of shares issued – just one way of gauging the financial worth of a company.

It’s not exactly clear what Amazon’s plans for Whole Foods are just yet. In a frustratingly vague statement, Amazon CEO 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.”

Bezos continued: “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."

The obvious connection is with AmazonFresh, a subsidiary of Amazon that operates a grocery delivery services through the USA and UK. The service is only currently available in select locations in those two countries, so by buying Whole Foods, Amazon could be making a serious play to dominate the grocery market in areas where Whole Foods currently operates.

Speaking to Bloomberg, Wedbush Securities analyst Michael Pachter said: “Amazon clearly wants to be in grocery, clearly believes a physical presence gives them an advantage. I assume the physical presence gives them the ability to distribute other products more locally. So theoretically you could get 5-minute delivery.”

Do you think Amazon buying Whole Foods is sensible? Let us know in the comments.

Also read: Amazon offers 27 percent premium for Whole Foods Market

Source: trustedreviews.com

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