Amazon to acquire Whole Foods for $13.7bn

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Amazon to acquire Whole Foods for $13.7bn

Whole Foods, with its roots linked back to the marriage of a New Orleans grocery co-op and budding Austin, Texas, chain, is being gobbled up almost three decades later by online retailer Amazon in a deal valued at about $13.7 billion.

However, Wal-Mart's shares fell about 7 per cent to $73.65 in morning trading after Amazon unveiled a $13.7 billion deal to buy upmarket grocer Whole Foods Market Inc.

Amazon said Whole Foods stores will continue operating under that name as a separate unit of the company.

John Mackey, CEO of Whole Foods Market, is a member of The Motley Fool's board of directors.

The transaction also may help Amazon sideline Instacart, a start-up that has delivered grocery orders from Whole Foods stores in more than 20 USA states and Washington, DC. Customers select what groceries they want online, then go to a nearby AmazonFresh Pickup location to pick up their order. "Amazon has moved squarely onto the turf of traditional supermarkets and poses a much more significant threat".

Grocery giant Kroger said Thursday that its profits for the year would be lower than Wall Street expected, sending its stock plunging almost 20%.

In the $13.7 billion, all-cash deal, Amazon will buy the Texas-based champion of organic and specialty food for $42 a share.

On top of the usual USA players, grocers from overseas, including Aldi, which is committing billions to expanding its US presence, and Lidl, which opened its first 10 stores just this week, are vying for a piece of the grocery pie.

Even before the announcement Friday, on Thursday Kroger stock "posted a double-digit decline amid food price deflation and stiff competition in the grocery space", analyst Hamrick said.

But Amazon's stock rose 3% on the news.

But the agencies have differing views on Amazon, rated Baa1 by Moody's and AA- by S&P.

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now. and Amazon wasn't one of them! The folks at Amazon are long-term thinkers. The deal is expected to close later this year. "Whole Foods Market has been satisfying, delighting and nourishing customers for almost four decades - they're doing an unbelievable job and we want that to continue", Bezos said in the release. It will acquire a grocery chain, Whole Foods, that's got some very nice produce, but has not been growing in any kind of spectacular fashion in recent years. (OK, not really, but it feels like that, doesn't it?) Getting into the grocery business is not easy, but by scooping up ownership shares in Whole Foods, it bought the company's logistic know-how. Whole Foods' headquarters will still be in Austin. The company is often derisively referred to as Whole Paycheck since the company charges a pretty penny for spelt and quinoa.

And the company became the butt of jokes by late-night comedians.

Whole Foods' stock drop was a major reason that activist investors were pushing the grocery chain to sell itself in the first place.

Low: Whole Foods has struggled, and of course one of the big changes they've implemented in the past year is trying to get prices down without sacrificing quality.

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