SEATTLE — Amazon and Whole Foods Market on Friday announced that they have entered into a definitive merger agreement under which Amazon will acquire Whole Foods for $42 per share in an all-cash transaction valued at approximately $13.7 billion.
This means Whole Foods stores could soon become distribution centers for Amazon's Prime Now and Amazon Fresh offerings, increasing the e-commerce giant’s grocery reach into more than 460 brick-and-mortar locations nationwide by the end of the year. Conversely, expect Whole Foods to add to Amazon’s selection of healthy and organic food for their online marketplace and possibly incentivize their more than 80 million members to shop at Whole Foods.
"The transaction will allow the online retail giant to boost not only its grocery sales, but expand its brick-and-mortar presence.”Currently, Whole Foods possesses a 2.7% market share of the $611.9 billion supermarket industry, according to IBISWorld. "Although industry revenue is only set to rise at an annualized rate of 0.8% throughout the five years to 2022, the transaction will allow the online retail giant to boost not only its grocery sales, but expand its brick-and-mortar presence," stated Madeline Hurley, IBISWorld industry analyst.
This isn't the first time Amazon has dabbled in brick-and-mortar retailing, Hurley noted. In 2015 the company opened a physical book store in Seattle and now operates a total of eight locations nationwide. In the next five years, as the retail sector becomes even more competitive, retail powerhouses like Amazon and Walmart are expected to invest in both online and physical stores to maximize their market share, she concluded.
“Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy,” stated Jeff Bezos, Amazon CEO. “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.”
“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,” said John Mackey, CEO Whole Foods Market.
Whole Foods Market will continue to operate stores under the Whole Foods Market brand. Mackey will remain as CEO of Whole Foods Market and Whole Foods Market’s headquarters will stay in Austin, Texas.
Completion of the transaction is subject to approval by Whole Foods Market's shareholders, regulatory approvals and other customary closing conditions. The parties expect to close the transaction during the second half of 2017.