The largest online retailer Amazon.com Inc. will acquire Whole Foods Market Inc. for $ 13.7 billion amid renewed efforts of the technology group to enter the market for traditional retailers of groceries.
Amazon will pay $42 per share for Whole Foods, valuing the company at 27% higher than the closing price of the trading session on Thursday. The transaction is expected to close in the second half of this year, writes WSJ.
“It seems a little strange deal because it’s real retail sales. On the other hand, it gives them (on Amazon – note. Ed.) Basis for distribution to deliver the goods in the short term, says Tim Griski, Director of the New York investment company Solaris Asset Management.
“This allows them to have a presence, shops can be expanded to offer other things. Amazon has mentioned the possibility of selling retail goods in real shops, where people can just go and look things, “he said.
Amazon’s move led to a decline in stock prices of competing grocery chains as investors worry that Amazon can do with this business what you do with bookstores. Shares of Kroger Co. fell by 14% that of Target Corp. – by 12%, while shares of Supervalu Inc lost 19 percent of its value. Shares of Costco Wholesale Corp. depreciated by 6.2%, while those of Wal-Mart Stores Inc. 5.8%.
The Amazon deal is “maybe what the doctor ordered for Whole Foods,” said Ron Johnston, who publishes the Shelby Report, which tracks the grocery industry. “Amazon is innovative and aggressive and certainly has the capital to infuse and do the kind of things that fit with their management model.”
At the same time move on Amazon it is happening at a time of change in the industry. Consumers buy most of their groceries outside traditional supermarkets. Online retailers, discounters and services catering occupy a growing market share. At the same time, global overproduction of goods led to a decline in the prices of many basic foodstuffs over the past 18 months by imposing pressure on many retailers to offer lower prices.
“It is pivotal because the most effective way for traditional companies to fight off disruption, from the likes of Amazon, has been to depend on their industry expertise and physical footprint, while strategically acquiring tech startups to tool themselves up to compete,” Cuatrecasas said. “This deal has dramatically flipped the table on those traditional companies.”