Amazon's $14-Billion Grocery Deal a 'Threat' to Food Retailers

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Amazonand Whole Foods Marketannounced that they have entered into a definitive merger agreement under which Amazon will acquire Whole Foods Market for $42 per share in an all-cash transaction valued at approximately $13.7 billion, including Whole Foods Market's net debt. And it shakes up a USA grocery industry that has been struggling to keep up with growing competition, both in stores and online. "We can only imagine the technological innovation that Amazon will bring to the purchasing experience for the consumer".

Amazon is making a bold expansion into physical stores with the $13.7 billion deal to buy Whole Foods, setting the stage for radical retail experiments that could revolutionize how people buy groceries and everything else.

Some analysts on Wall Street see the acquisition as the online retailer's big entry into the food business. "This deal has dramatically flipped the table on traditional companies". However, Wal-Mart has still been able to build over 4,600 Wal-Mart and Sam's Club locations. Although Amazon's plans for Whole Foods is not clear, the acquisition has some wondering what will happen to the chain's existing stores.

Set up in 1978, Whole Foods, whose stores now span more than 430 locations, has found it hard to attract more mainstream consumers as Walmart and other large chains have stepped up their sales of natural and organic products.

The supermarket chain will continue to operate stores under the Whole Foods Market brand and John Mackey will remain the company's CEO, the release said.

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Businesses being in competition is always great for the consumer. The Bentonville, Ark. -based retailer announced Friday that it had agreed to buy online clothing company Bonobos for $310 million. Its shares closed at $42.68 yesterday, up 29.1 percent.

The transaction is subject to approval by Whole Foods Market's shareholders, regulatory approvals and other customary closing conditions, but the parties expect to close the transaction in the second half of 2017, it added.

"Generally speaking, there is very little overlap between these two companies", said Michael Carrier, a Rutgers Law School professor who specializes in antitrust issues. But that's their real objective here so they can make a short-term profit.

Stanford University Marketing professor Wesley Hartmann said quality may not slip if the takeover comes to fruition because Amazon is incredibly efficient, while industry analysts have said Whole Foods is not.

Meanwhile, Whole Foods - with a fleet of more than 460 stores - has come under fire from activist investors for dreary sales as organic grocers such as Sprouts Farmers Market and Natural Grocers and traditional grocers such as Walmart, Kroger and Target, increasingly offering their own organic options, hone in on the Austin-based grocery chain's turf.