Amazon on Friday announced that it has inked a deal to acquire Whole Foods Market for close to US$14 billion in cash. The agreement includes assumption of Whole Foods’ net debt.
Whole Foods will run as a wholly independent subsidiary of Amazon. It will continue to operate stores under its own brand and source products from vendors and partners.
Cofounder John Mackey will continue in his role as Whole Foods’ CEO, and the company’s headquarters will remain in Austin, Texas.
The deal is expected to close in the second half of the year.
News of the deal sent share prices of grocery chain Kroger — as well as other retail chains that carry groceries, such as Target and Costco — plummeting. However, Whole Foods stock shot up 28 percent.
“Large grocery stores like Kroger and Albertsons will be especially affected,” said Madeline Hurley, senior analyst at IBISWorld.
Amazon’s resources and online channel will make it “a larger threat in the food retailing market,” she told the E-Commerce Times.
Amazon “will be able to compete with large grocers through multiple channels,” Hurley said.
Online Grocery Boom Ahead?
“With the purchasing power that a partnership brings, and the innovation that Amazon has already introduced with its ‘checkout-free’ grocery stores, prices for high-quality organic produce and prepared foods could decline significantly, putting pressure on a low-margin industry,” noted Tom Caporaso, CEO of Clarus Commerce.
“With this merger, Amazon will also be able to invigorate the popularity of a highly fractured online grocery and delivery market, with the rollout of Amazon Fresh nationwide,” he told the E-Commerce Times.
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