Amazon-Whole Foods Marriage Could Disrupt Grocery Business (NASDAQ:AMZN)

Amazon to buy Whole Foods Market in deal valued at $13.7 billion

Amazon to buy Whole Foods Market in deal valued at $13.7 billion

With a focus on "last mile" delivery of fresh foods, Instacart could certainly complement Amazon's existing services.

"The ramifications for all of retail are seismic - not just retailers that sell grocery, but for everyone", Gordon Haskett analyst Chuck Grom said. The deal comes just months after Walmart's $3.3 billion purchase of Amazon competitor Jet.com.

Shares of Amazon were trading at $988.52 in pre-market trading, a 2.53% jump, while Whole Foods shares were down 6.74% at $33.06.

The acquisition is seen as a move by Amazon to more aggressively target the grocery section of retail has proven more stubbornly resistant to digital channels.

Completion of the transaction is subject to approval by Whole Foods Market's shareholders, regulatory approvals and other customary closing conditions.

But a person close to Instacart told Bloomberg that the startup thinks it can still hang on to its Whole Foods partnership. How?

Following Amazon's move to plant a bigger stake in the food-selling business, shares of Walmart tumbled 4.6%, making it the biggest loser in the blue-chip Dow Jones industrial average.

Remember those rumors floating around for the past year that Kroger might buy Whole Foods?

Amazon has been looking at shop layouts that could allow traditional in-store purchase, online ordering with on-site pickup, and home delivery, using store warehouse space as a distribution point, Ladd said.

The company also has been testing sensors at a convenience store in Seattle to track items as shoppers put them into baskets or return them to the shelf.

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Whole Foods, a former Wall Street darling, hasn't posted double-digit-percentage sales gains since 2013, and most other chains have cribbed its halo of organic produce and customer-pleasing atmosphere in recent years.

The market reverberations of the announced deal traveled beyond the retail industry - shares of food companies like Hershey and Campbell Soup slid, too.

Amazon's 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". The grocer will continue to operate stores under the Whole Foods Market brand and John Mackey will remain as its chief executive officer, the companies said.

Whole Foods had been under pressure from activist hedge fund Jana Partners LLC prior to the announcement of Friday's deal, prompting it to overhaul its board of directors.

Hartmann said he expects the online retailer to introduce some efficiencies to Whole Foods' operation.

Excluding debt, the deal is valued at $13.39 billion. Whole Foods even installed features in some stores meant to make Instacart shoppers' work faster and easier.

The deal is expected to close in the second half of 2017.

One of the world's biggest online consumer goods companies is getting even bigger. It has expanded from a book seller into a merchant of almost all consumer products, as well as producing videos. The stores could teach cooking skills, hold classes and educate about food.

Offering the most convenient shopping experience possible continues to drive the competition.

Barclay's analyst Karen Short today noted that another offer could be placed on the table for Whole Foods, prompting her to raise her stock price target for Whole Foods to $48 per share.

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