Amazon to buy Whole Foods for $13.7 billion

  • Amazon to buy Whole Foods for $13.7 billion

Amazon to buy Whole Foods for $13.7 billion

The investment banks that advised Amazon and Whole Foods on this deal (Goldman Sachs, Evercore Partners) will surely make tidy sums if it is approved. It implies a trailing 12-month price-to-earnings multiple for Whole Foods of 31 times, versus a 14.4 average for the S&P 500 Food Retail index. The deal is expected to close by the end of the year.

Since Whole Foods is a publicly traded company it could be scuttled if another bidder decides to offer a lot more money for the grocery chain.

Yes. The world's largest e-commerce company is now a very substantial brick-and-mortar food retailer.

Last year, it opened Amazon Go, a checkout-free grocery store in Seattle, where customers are charged on their Amazon accounts for the products they leave the store with without ever having to see a cashier or self-checkout system. It's not hard to imagine Amazon installing its lockers inside of each of those locations, or using them to further expand its Amazon Fresh grocery delivery service.

Here's a brief look at the winners and losers in Friday's big deal.

It's the biggest acquisition in Amazon's history.

Offering the most convenient shopping experience possible continues to drive the competition. "Why is Amazon going to let a third party vendor take margin off of their sale?" Both companies said there will be no layoffs, but did not respond to other questions about Amazon's plans for Whole Foods.

Kroger dropped 9 percent Friday and Target, Walgreens and Wal-Mart each lost about 5 percent.

The Whole Foods store at the foot of the Oakland Hills is an always busy success story even as some customers expressed a range of views when asked about Friday's bombshell announcement that online giant Amazon is snapping up the specialty grocer. Whole Foods will keep operating stores under its name.

Hrach Simonian, an investor in Instacart and general partner at Canaan Partners, stressed that Instacart has many other partners.

"It's combination of powerful brands with complimentary strengths, it's good for Amazon helping them get a foothold in the traditional retail business, and it's great for whole Foods, bringing Amazon's passionate focus on the customer executed though innovative technology". The company gets a revenue share from retailers based on the size of each basket. So when you give consumers the flexibility and power to procure the goods they want, and have them delivered straight to their front door, that's a winning proposition.

The deal represents a dramatic turn in strategy for Amazon, which has offered food delivery through its Fresh service for a decade but has not made a major dent in the $700 billion grocery market.

Amazon's shares were up 3% at $994.45.