Online retail giant, Amazon, led by Jeff Bezos has agreed to buy the upscale grocery chain, Whole Foods for a whopping $13.7 billion. This is Amazon’s largest purchase ever.
The Whole Foods stock has skyrocketed by as much as 28%. Amazon agreed to pay $42 a share, all in cash to Whole Foods. This also includes their net debt.
Whole Foods is an American Supermarket chain. It sells organic food which is without any artificial preservatives, colours, flavours, sweeteners, and hydrogenated fats. Whole Foods provides employment to over 87,000 people in its 460 stores scattered in different parts of the US. It has also spread to the UK and Canada.
All the stores of Whole Foods will still continue to operate under the same name. CEO John Mackey will carry on to lead the company and its headquarter will still be in Austin, Texas. Also, it will use its already existing vendors and partners around the world.
Amazon is slowly trying to build a series of outlets, mainly supermarkets, to win the crusade of dominance. It has already launched Amazon Fresh, a grocery delivery system which is running efficiently in some parts of the US and the UK. They are still formulating their “click and collect” model wherein consumers can buy groceries online and pick them up in person. Last year, the company lost $7 billion in subsidising deliveries. This deal would assist Amazon to further expand their horizon and shrivel shipping costs to a considerable extent.
Stocks of many other supermarket giants like Walmart, Target, Costco, SuperValu and Kroger have plummeted to a great extent after the deal was announced. These companies saw a disappearance of about $30 billion overnight. In comparison to that, Amazon’s shares saw an upsurge of 3% at $993.40 which added around $14 billion to the company’s market capitalization. British supermarket chains, along with the US-based giants were hit with this epiphany.
Amazon’s biggest announced purchase before this was of a video-game service Twitch Interactive Inc. for $970 million in cash. At the end of March, Amazon had over $21.5 billion of cash and equivalents.
Amazon has consistently been experimenting with various ways a consumer decides to buy products. This mammoth move is a result of the company’s belief that the customers want a combination of online and real-world buying options.
In all, this colossal deal of 13.7 billion dollars would help Amazon to lower the prices of the goods sold by Whole Foods, offer better customer service and provide its users to select from a wide range of products.