Transactions - JUNE 16, 2017

Amazon acquires Whole Foods for $13.7b

by Jody Barhanovich

Amazon and Whole Foods Market have entered into a definitive merger agreement under which Amazon will acquire Whole Foods Market for $13.7 billion, including Whole Foods Market’s net debt.

The deal gives Amazon an instant expanse of 460 high-end brick-and-mortar stores across the United States, Canada and the United Kingdom.

Whole Foods had been struggling recently amid stepped up competition from other grocery stores such as Costco Wholesale and Trader Joe’s. With the help of Amazon, Whole Foods will better compete against Walmart, the world’s largest retailer, which has recently stepped up its e-commerce game.

In February, Whole Foods hit the brakes on its plans to expand its stores after reporting its sixth straight quarter of falling sales, as organic and natural products have become more widely available at traditional supermarkets.

The acquisition of Whole Foods will be Amazon’s biggest purchase, outpacing its previous acquisitions of Twitch for $970 million in 2014 and its $1.2 billion acquisition of online shoe retailer Zappos in 2009.

Whole Foods Market will continue to operate stores under the Whole Foods Market brand and source from trusted vendors and partners around the world. John 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.

Amazon has been making headlines with its expansion into the brick and mortar platform. Recently, its first Amazon bookstore opened in Paramus, New Jersey. The Paramus store is the company's eighth Amazon Books and the first in New Jersey. The company began opening physical bookstores in 2015.

And in December 2016 Amazon first unveiled its concept Amazon Go, which are checkout-free grocery stores. Shoppers will use an app, also called Amazon Go, to automatically add the products they plan to buy to a digital shopping cart; they can then walk out of the building without waiting in a checkout line.

Amazon appears to be preparing to open checkout-free grocery stores in Britain after registering a U.K. trademark for its Amazon Go format, according to a Guardian article.

Last year, Amazon has plans to build 2,000 grocery stores across the United States in the next decade, Business Insider previously reported. The first Amazon Go store opened to the public in Seattle earlier this year.

In addition, the online retailer has played a major role in the story of Seattle’s development since it moved its corporate offices to the South Lake Union neighborhood in 2010. Amazon added more than 110,000 employees in 2016, according to its fourth-quarter earnings report in February 2017, bringing the total global headcount to more than 340,000. The company currently has more than 30,000 employees in Seattle and is listing more than 10,000 open jobs in the metro area.

It has been expanding its office space immensely, unveiling big plans for new buildings in the Denny Triangle neighborhood of Seattle. By 2022, when construction is expected to be complete, Amazon could occupy about 12 million square feet of real estate in Seattle, which is more than 20 percent of the city’s current total office inventory, according to GeekWire.

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