Grocery Stocks Are Crashing After Amazon Buys Whole Foods For $42 Per Share

Whole Foods stock was halted for ‘news pending’… and now we have the answer – Amazon to acquire Whole Foods Market for $42/share in an all-cash transaction valued at ~$13.7b, including Whole Foods Market’s net debt.

With 9% of the float short this stock, we can only imagine the squeeze on this 27% premium over last night’s close.

Full Statement:

Amazon (NASDAQ:AMZN) and Whole Foods Market, Inc. (NASDAQ:WFM) today announced 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.

“Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy,” said Jeff Bezos, Amazon founder and CEO.

“Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades – they’re doing an amazing job and we want that to continue.”

“This partnership presents an opportunity to maximize value for Whole Foods Market’s shareholders, while at the same time extending our mission and bringing the highest quality, experience, convenience and innovation to our customers,” said John Mackey, Whole Foods Market co-founder and CEO.

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.

The purchase of Whole Foods is Amazon’s largest acqusition in history:

Amazon expects to finance the acquisition with debt.

  • Amazon enters into commitment letter for 364-day senior unsecured bridge term loan facility in an aggregate principal amount of up to $13.7 billion.
  • Expects to finance deal with debt financing, which may include senior unsecured notes issued in capital markets transactions, term loans, bridge loans, or any combination thereof, together with cash on hand, co says in a filing
  • Goldman Sachs, BofA-Merrill Lynch to lead debt financing

Amazon stock is up 3% on the news…

Some context on the relative size…

And Kroger, Wal-Mart, Sprouts, and Target are plunging… (WMT -4%, TGT -5.5%, SFM -7.6%, KR -12%)

And European supermarkets are getting hammered –

  • *AHOLD, CARREFOUR, TESCO FALL TO LOWS ON AMAZON/WHOLE FOODS DEAL
  • *AHOLD DELHAIZE SLUMPS 6.8% IN AMSTERDAM ON AMAZON NEWS

With good reason probably. Grocery margin are 1-2% at best, and if Amazon can truly create smart stores with no check outs and cut employees in half they can kill regular supermarkets…

As Bloomberg’s Gadfly recently opined, Amazon will kill your local grocer…

Amazon’s done it to books. And electronics. And clothing. Now it wants to rule the grocery aisles.

But Amazon still has a ways to go — the online retailing behemoth has taken a slow, yet calculated approach to attacking the grocery store. After years of testing the AmazonFresh program in its Seattle hometown, it began expanding the grocery delivery service to other cities in 2013. Today, it delivers fresh fruit and meat in parts of New York, New Jersey, Pennsylvania, Connecticut, California, Washington and Maryland. It also delivers food through its Amazon.com website and its Prime Now program.

And even though research from Cowen & Co. pegs Amazon’s market share of food and beverages sold online in 2015 at about 22 percent, that overall online grocery market in the U.S. is pretty small. Out of the $795 billion Cowen expects Americans to spend on food and drinks this year, it estimates only about $33 billion of it will be spent online.

That’s because it has taken shoppers a long time to grow comfortable with buying their apples, chicken breasts and granola online when they can stop by a physical store on the way home from work and actually touch and smell the food they’re buying. Companies struggle to profit from the very expensive business of picking, packing and transporting fresh food to their customers. It’s much easier to mail a video game or book, which doesn’t have to be kept cold or free of bruises.

But for Amazon, the grocery business not only brings more sales, it could also make its business more profitable. People tend to buy groceries weekly or daily, so getting them hooked on delivery justifies sending trucks out more frequently. Then any general merchandise, like a book or toy, that Amazon sells along with the food adds to profits. And since Amazon will need more trucks for grocery delivery, it could reduce its reliance on shipping companies, which have contributed to soaring costs. For now, Amazon is likely to take added grocery costs on the chin, in hopes it will pay off down the line.

Growing its AmazonFresh and Prime Now offerings suggests Amazon is gearing up for the long haul in grocery. Though traditional grocers are not likely to see sales migrate to Amazon right away, that luxury won’t last. And just like bookstores, your local grocer could be toast.

Thank you Feds…

Photo: “Whole Foods Market” by Jeremy Brooks is licensed under CC BY-NC

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  • JohnDille

    IN EFFECT… CHINA IS TOTALLY AND COMPLETELY CONTROLLED BY REPUBLICANS!!! THE COMMUNIST DICTATORSHIP IN CHINA WORKS PRETTY MUCH THE EXACT SAME WAY THAT THE CORPORATE REPUBLICAN DICTATORSHIP HERE WORKS… EXCEPT THEY DO NOT YET HAVE TOTAL CONTROL OVER THE NATION. BUT… OF COURSE… REPUBLICANS ARE WORKING ON THAT PROBLEM! WITH YOUR HELP, NO DOUBT!!! BY THE WAY… MY GRANDFATHER WHO LOST A LARGE PART OF HIS FARM DURING THE DEPRESSION AS MY FATHERS FATHER. MY MOTHER WAS IN CHINA ON A MILITARY ASSIGNMENT… AND MET MY FATHER THERE… BECAUSE HE WAS ALSO IN THE MILITARY! THEY PROBABLY NEVER TAUGHT YOU REPUBLICANS THAT THE UNITED STATES AND CHINA WERE ALLIES DURING WORLD WAR 2!!!! THERE IS A LOT OF OTHER REAL HISTORY THAT YOU REPUBLICANS NEVER LEARNED… ALONG WITH A LOT OF SCIENCE… AND THE ART OF THINKING FOR YOURSELVES, WITHOUT THE INFLUENCE OF FOX NEWS AND ALL THE RIGHT WING MILLIONAIRES WHO GOT THAT WAY BECAUSE THEY WERE SUCH WELL PAID MIND MANIPULATORS, BRAINWASHING TENS OF MILLIONS OF PEOPLE LIKE YOU TO THINK LIKE YOUR BILLIONAIRE MASTERS WANT YOU TO THINK!!!

  • JohnDille

    Suppose that you were a fly on the wall, deep inside GOP HQ on Election Night last year. What was the reaction of Mitch, Paul and friends?

    Was it, “OMG, what Frankenstein Monster have we created?”

    I don’t think so.

    More like this:

    “We took some self-absorbed fool who declared bankruptcy six times, who beclowned himself trying to prove that Obama was born in Kenya, who publicly brags of bribery, who constantly insults women, veterans and the disabled, who sucks up to foreign dictators, who says to an audience of tens of millions that wages are too high, who tweets in the middle of the night like a lunatic, whom 15 different women have accused of sexual assault, and who confessed on video that he grabs women’s private parts – and we elected him President of the United States!”

    Also, this:

    LMAO-LMAO- LMAO- LMAO- LMAO- LMAO- LMAO- LMAO- LMAO- LMAO- LMAO- LMAO- LMAO- LMAO- LMAO- LMAO- LMAO- LMAO- LMAO.

    Well, next Tuesday, they’re trying to do it again. Because Karen Handel, the GOP’s nominee in Tuesday’s special election in Georgia to replace Rep. Tom Price, is the worst major party nominee for elective office since . . . Donald Trump. Even worse than the guy who body-slammed the reporter on the night before his election.

    Who is Karen Handel?

    As Georgia Secretary of State, she instituted voter suppression measures so horrific that the U.S. Department of Justice ordered her to stop. She specifically targeted African-American, Hispanic and Asian voters. She falsely accused thousands of voters of being “non-citizens.”

    She ran for Governor in 2010, on the strength of an endorsement by . . . Sarah Palin. And lost.

    While Vice President at a breast cancer charity, Handel cut off funding for Planned Parenthood’s free breast cancer screening – because she is anti-abortion. Four days later, the charity reversed Handel’s decision, and she resigned in disgrace. She then complained that Planned Parenthood is “partisan.”

    She ran for the U.S. Senate in 2014, on the strength of an endorsement by Sarah Palin, and lost.

    Handel has invited Donald Trump to campaign with her, and Trump held a fundraiser for her.

    A couple of weeks ago, Handel said that she’s against a livable wage. Not just a living wage, but a livable wage. Meaning any wage you might actually be able to live on.

    In sum, Handel has blood on her hands in two of the worst GOP scandals of the decade: voter suppression of minorities and attacks on women’s health – and as Sarah Palin might say, Handel “pals around” with Donald Trump.

    But you know what They’re thinking: If They can elect Donald Trump, then They can elect anyone – even Karen Handel.

    Don’t let it happen. You don’t want to see that smug grin on Their ugly faces next Wednesday – yet again
    Courage,

    Alan Grayson

  • Scott

    Been awhile Deck Chair. I see your descent into ultimate dillusion is just about complete. By the, when did you and your mom get back from China, before or after you grandfather lost the farm? You do realize there are no republicans in China so there might be a rabbit hole for you to consider. They have excellent Wi-Fi so you can rant internationally without having to deal with those “pesky publicans”. Just a thought. Looks like the banana is just about all the way up the monkey’s butt. Keep rearranging the chairs there pardner. Adious.

  • JohnDille

    WELL… I AM IN THE LATE STAGES OF DIGGING DEEP INTO A HUNDRED YEARS OF FEDERAL INCOME TAX DATA… WITH 2014 THE LATEST DATA AVAILABLE… AS OPPOSED TO YOUR 2007 DATA! THE POINTS YOU MAKE ABOVE ARE VALID… AND PROVE MY POINT… THAT LOWER INCOME AMERICANS… EFFECTIVELY THE BOTTOM 50 TO 55% IF YOU COUNT ALL THE FOLKS WHOSE INCOMES ARE TOO LOW TO EVEN FILE A RETURN… HAVE SUCH LOW GROSS NCOMES THAT… AFTER THEY TAKE THE STANDARD DEDUCTIONS AND PERSONAL EXEMPTIONS… GOOD PROXIES FOR THEIR BASIS COSTS OF LIVING…. HAVE NO INCOME ON WHICH TO PAY MUCH OF ANY FEDERAL INCOME TAXES! THEY DO… HOWEVER PAY A MUCH HIGHER SHARE OF THEIR GROSS INCOME INTO THE SOCIAL SECURITY AND MEDICARE SYSTEM… AND INTO STATE AND LOCAL TAXES… THAN TOP INCOME PEOPLE DO…. SO THE TRUE TOTAL TAX BURDEN ON LOWER INCOME PEOPLE IS ALMOST AS HIGH AS THE TRUE EFFEDCTIVE TOTAL TAX RATES PAID BY TOP INCOM PEOPLE!!! THAT IS ESPECIALLY TRUE IN REPUBLICAN STATES WHERE THE TAX BURDEN IS OFTEN OUTRAGEOUSLY REGRESSIVE!!! SO… ON TOP OF LOW WAGES IN REPUBLICAN STATES, HIGH TAXES ON LOWER AND MIDDLE INCOME HOUSEHOLDS KEEP A MAJORITY OF ALL PEOPLE IN REPUBLICAN STATES IN OR NEAR POVERTY…. WHICH MEANS THEY NEVER SHOP AT FANCY PLACES LIKE WHOLE FOODS… OR AMAZON… OR MUCH OF ANY OTHER PLACES!!! WHICH IS EXACTLY WHAT I WAS TRYING TO POINT OUT ABOVE… BEFORE YOU GOT ALL SNIPPY WITH ME FOR TELLING YOU THE COLD HARD TRUTH!!!

  • JohnDille

    YEAH… YOU REPUBLICANS PROJECT PRETTY MUCH ROUTIUNELY!!! THEN TURN AROUND AND BLAME DEMOCRATS FOR ALL THE PROBLEMS THAT OU CAUSE, AND INSINUATE THAT IS DEMOCRATS THAT DO ALL THE PROJECTING!!! SWEET LITLE SCAM YOU RIGHTIES RUN!!!

  • silvernotes

    Look up “projection” then you’ll get it. Done with this……

  • silvernotes

    I don’t know where you get your information from….

    According to the nonpartisan Tax Policy Center, the top 1 percent of Americans paid 33.4 percent of their expanded cash income (a broad measure of pretax income) in federal taxes. Middle class Americans—or those in the middle 20 percent—pay 13.7 percent of their income to federal taxes, while the poorest pay 3.1 percent.

    Furthermore, A CBO report says middle-class Americans–not the rich or the poor–pay the majority of annual tax revenues taken in by the federal government, according to data released in a new Congressional Budget Office study. Households earning less than $34,300 per year, meanwhile, actually pay a negative average federal income tax rate.

    Middle-class households that earned between $34,300 and $141,900 paid 50.5 percent of all federal tax revenues in 2007 (the most recent year analyzed), according to the CBO study released Thursday, and households that earned between $34,300 and $352,900 paid 66.7 percent of all federal taxes.

    Households in the top 1 percent for annual income (those earning more than $352,900) paid a healthy 28.1 percent of all federal taxes, but households in the lower income brackets paid relatively little. Those earning less than $34,300 paid only 5.2 percent of all federal taxes, and those earning less than $20,500 carried almost none of the federal tax burden (just 0.8 percent of the total) in 2007.

    The average overall federal tax rate (including income, Social Security, Medicare, excise and other taxes) for all American households was 20.4 percent in 2007. But the average rate rose dramatically as household income rose. Households earning less than $34,300 paid an average overall federal tax rate of 10.6 percent, while households earning more than $74,700 paid an average overall federal tax rate of almost two and half times that much–25.1 percent.

    This is now way off the topic, so I am done with class on this matter. Do better research before you comment in the future please.

  • JohnDille

    YOU MEAN… WHEN I TALK LIKE DONALD TRUMP… OR PRETTY MUCH ANY RIGHT WING REPUBLICAN… YOU SEE THAT AS ANGER… BUT WHEN TRUMP OR REPUBLICANS TALK LIKE ME… YOU SEE THAT AS STANDING UP FOR AMERICA??? AH… NOW I GET IT!!! REPUBLICAN HYPOCRITES!!!

  • silvernotes

    It is exactly the vitriol that you exhibit that plagues civil discussion in our country right now…you sir, have some anger issues and you’d do well to address them.

  • JohnDille

    THE TOP QUARTER MILLION PEOPLE MADE MORE… I WILL NOT SAY EARNED MORE BECAUSE THE TOP INCOME PEOPLE RARELY DO ANYTHING TO ACTUALLY EARN WHAT THEY GET PAID… THAN THE BOTTOM 80 MILLION PEOPLE DID EARN… MOSTLY VIA HARD OR UNPLEASANT LABOR… WORKING TO MAKE THE RICH EVEN RICHER BECAUSE THAT IS THE KIND OF SYSTEM THAT RICH REPUBLICANS HAVE CREATED!!! AS FOR BERNIE SANDERS MAKING A MILLION BUCKS… BIG DEAL… DONALD TRUMP STEALS THAT MUCH IN A TYPICAL AVERAGE DAY OR TWO!!!

  • JohnDille

    I TOLD THE TRUTH AND YOU GOT MAD… JUST LIKE ALL RIGHT WINGERS DO!!! THEEFORE YOU ARE CLEARLY A RIGHT WINGER!!! BESIDES… ONLY RICH REPUBLICANS CAN AFFORD MUCH FRESH PRODUCE! ALL THE REST OF US HAVE SUCH LOW WAGES THAT WE CAN ONLY AFFORD THE LEFT OVER STUFF THAT YOU RICH REPUBLICANS ARE TOO GOOD TO EAT!!!

  • silvernotes

    There is more than income tax to consider..think about it, you’ll get it. Oh, by the way Bernie made over $1 million dollars last year…guess that one got away from the Repubs!

    The rich don’t make “all” the money, the middle class makes and pays in taxes most of it. Furthermore, the money pie is NOT fixed in size, so if someone can make more money than you or I, more power to them…they are NOT taking anything away from the rest of us. The democratic notion that taxing the so-called rich is going to save us is pure non-sense…even if you took ALL their money it wouldn’t help solve the over-spending problem.

  • silvernotes

    SO now wanting fresh local produce and supporting my local grocery stores is “right wing”…you truly are a piece of work.

  • JohnDille

    I AM NOT RICH… SO WHY WOULD I HAVE TO PAY MORE TAXES IN A DEMOCRATIC STATE???? DEMOCRATS TAX THE RICH, MOSTLY, BECAUSE THE RICH MAKE ALL THE MONEY!!!

  • JohnDille

    PLEASE TAKE YOUR RIGHT WING POINT OF VIEW ELSEWHERE… MAYBE NAZZI GERMANY… WHERE IT WOULD HAVE BEEN APPROPRIATE… REAL AMERICANS ARE SICK AND TIRED OF YOU GREEDY SELFISH RIGHT WING AMERICA HATERS!!!

  • silvernotes

    If you don’t like your republican state, then move to a democratic one and pay more taxes……and stop babbling.

  • silvernotes

    Please take you partisan politics somewhere else… we’re tired of it. I see you still can’t find the CAPS key either.

  • JohnDille

    MOST OF THE 35 MILLION OR SO BUSINESSES IN THE UNITED STATES ARE STARTED AND OPERATED IN ORDER TO TAKE ADVANTAGE OF ALL THE TAX BREAKS GIVEN TO BUSINESSES!!! IF THE TAX CODE EVER GETS SIMPLIFIED… AS REPUBLICANS SAY THEY WANT TO DO… BUT REALLY DON’T…. HALF THE BUSINESSES IN THE USA WOULD DISAPPEAR BECAUSE THERE WOULD NO LONGER BE ANY TAX BENEFIT IN OPERATING THEM… AND WITHOUT THE TAX BENEFITS, THERE WOULD NO LONGER BE ANY POINT TO OPERATE THE BUSINESS. AMAZON IS SURELY JUST LOOKING TO TAKE ADVANTAGE OF ALL THE TAX BENEFITS THEY WOULD GET BY OWNING AND OPERATING THIS LOW MARGIN BUSINESS!!! WHICH MAKES A LOT OF SENSE… AMAZON PAYS ALMOST NO FEDERAL INCOME TAXES BECAUSE IT SPENDS ALL OF ITS REVENUES IN WAYS THAT ALLOW IT TO GET EVER LARGER… ALL WITHOUT HAVING TO PAY HARDLY ANY TAXES!!! THE GROWTH OF ITS ASSET BASE IS ITS PROFIT… AND THAT IS MOSTLY NOT TAXABLE!!! MOST REALLY RICH PEOPLE DO THE EXACT SAME THING… THEY BUY ASSETS AND HOLD THEM FOR DECADES… AND THUS PAY NO TAXES ON THSE ASSETS… EVEN WHILE THEY ARE INCREASING IN VALUE TENS AND A HUNDRED AND A THOUSAND AND EVEN TEN THOUSAND FOLD!!! I WONDER HOW MANY PEOPLE ARE EVEN AWARE OF THAT VAST SCAM…. IT SAVES THE RICH HUNDREDS OF BILLIONS IN TAXES EVERY SINGLE YEAR, AND NO ONE EVER EVEN MENTIONS IT!!!

  • JohnDille

    SOME IDIOT STARTED A HOME DELIVERY BUSINESS HERE, AND WHENEVER I GO TO THE GROCERY STORE, I SEE A HALF DOZEN OF THAT OUTFITS EMPLOYEES WANDERING AROUND, LOOKING LOST, TAKING A FEW ITEMS OFF THE SHELVES, FOR DELIVERY TO WHATEVER SUCKERS ARE BUYING STUFF THROUGH THEM. THIS IS A SOLIDLY REPUBLICAN STATE, WHICH MEANS WAGES ARE TOO LOW FOR MOST PEOPLE TO HAVE ANY MONEY… EVEN FOR THE BASICS… SO IT MUST BE A FEW RICH REPUBLICANS WHO ARE USING THIS SERVICE, BECAUSE THEY ARE ABLE TO AFFORD THE 20 TO 30% MARK UPS IN PRICES THAT WOULD BE NECESSARY TO PAY FOR THIS SERVICE. LIKE MOST NEW BUSINESSES IN THIS AREA, THEY WILL LIKELY GO OUT OF BUSINESS IN A COUPLE OF MONTHS! REPUBLICANS ARE SUCH IDIOTS… LOW WAGES MEANS NO ONE HAS ANY MONEY TO SUPPORT NEW BUSINESSES WITH… WHICH EXPLAINS WHY NEW BUSINESS START UPS ARE SO LOW IN MOST REPUBLICAN STATES!!! NEVER MIND… NO ONE HAS ANY MONEY TO INVEST IN NEW BUSINESS START UPS… EXCEPT RICH REPUBLICANS LOOKING TO START BUSINESSES THEY CAN USE AS TAX WRITE OFFS AND OTHER SUCH SCAMS!!!

  • Fabian

    I think it’s BS. W(the)F sales are dropping for 7 quarters because they simply sell what everybody else now does for twice the price. Furthermore, the libtard feel good atmosphere of well paid, well benefited, cute and smart looking employees is going to disappear if they replace them with bots. Finally, I choose my produce myself. W(the)F or not, supply chains in the US are so big that freshness is a challenge. When you buy produce, a careful selection is warranted.

  • silvernotes

    The last time I checked, the grocery market is a small margin business. Any benefit to Amazon looks to be in the synergy (i.e. shipping, as mentioned). I can’t but wonder how Amazon is going to handle returns. How can I check for freshness, does Amazon have drone service for the materials I need for supper tonight? Where is the food being grown? NAH….I don’t think grocery stores are going to be hit too hard, particularly with fresh produce. It should be interesting to see what Amazon makes of it though…my Amazon Prime will likely go up now.

  • soluna1969

    Amazon is a monopoly and is quickly becoming a single point of failure in the nation’s supply chain for All Goods. Now, there won’t be even a 3 day supply of food on the local grocer shelves. What will you do if there is a disaster? Any disruption to just-in-time supply chains will now become life threatening.