Online retail giant Amazon is acquiring grocery chain Whole Foods Market in a deal worth about $13.7 billion, the two companies announced Friday.
Amazon will pay $42 per share in an all-cash transaction that is projected to close in the second half of 2017.
Whole Foods, a brand known for helping to take organic produce mainstream, would continue operating under its brand name, remain headquartered in Austin, Texas, and be run by CEO and co-founder John Mackey.
“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,” Amazon CEO Jeff Bezos said in a statement.
Amazon has offered local food delivery via its AmazonFresh program, created in 2007, in a handful of cities, including its home base of Seattle, as well as in San Francisco and New York. Late last year the company began experimenting with brick-and-mortar locations that are free of checkout lines. Shoppers scan an app upon entering the so-called Amazon Go store, and computer vision and sensor technology detects items they place in their bags and charges their Amazon accounts.
But the purchase of Whole Foods and its 460 stores in the U.S., Canada and the U.K. gives the company access to instant infrastructure — including the expensive facilities needed for handling perishables — in scores of urban and suburban markets.
Amazon has also dabbled in drone delivery of its books and other packages; the sprawling network of Whole Foods stores could form the basis of the sort of localized distribution network future delivery-by-drone would require.
The purchase requires signoff from U.S. regulators and Whole Foods shareholders. If it goes final, Bezos would continue expanding his reach into industries outside of e-commerce. He personally owns both The Washington Post and Blue Origin, a commercial space exploration company.
The deal would mark Amazon’s largest acquisition, in terms of value, by a long shot. Its biggest deal on record was struck in 2014, when Bezos’ shop put down $970 million in cash to acquire the video-game service Twitch Interactive, according to data from Bloomberg.
Initial reaction from one advocacy group active in the organic food space, Food & Water Watch, was scathing. Wenonah Hauter, Food & Water Watch’s executive director, called for regulators to block the deal, arguing prices for consumers would rise following the combination of the powerhouse online retailer and one of the country’s 10 largest grocery supermarket chains.
“Too few companies already exert outsized influence over our food choices. This is extreme consolidation of the food system in action, which will lead to higher prices, fewer choices for consumers, and bigger profits for billionaires like its owner, Jeff Bezos,” Hauter said in a statement.
She noted that the top four grocery retailers have a hold over some 62 percent of U.S. food sales and that more than 4,000 grocery stores were combined under two owners by way of the Albertsons-Safeway and Ahold-Delhaize mergers.
News of the deal comes right after Mackey blasted activist investor Jana Partners, which bought a stake of nearly 9 percent in Whole Foods and had been pushing for a sale. Mackey told Texas Monthly, in an article this month titled “The shelf life of John Mackey,” that Jana Partners was attacking his reputation in a ruthless quest to turn a profit.
“They’re putting a bunch of propaganda out there, trying to destroy my reputation and the reputation of Whole Foods, because it’s in their self-interest to do so,” he told Texas Monthly.
Jana Partners, together with fellow activist investor Neuberger Berman, had also been pressing for an operational overhaul of Whole Foods amid declining sales. Two governance changes were put in place after the activists bought their way in, including a shake-up last month that included the hiring of a new CFO with e-commerce experience and the naming of five new independent directors to the board.
“We need to evolve,” Mackey added in the interview with Texas Monthly. “We need to get better, and we’re doing that. But these guys just want to sell us, because they think they can make forty or fifty percent in a short period of time.”
Amazon flirted with the idea of buying Whole Foods last fall but opted not to, Bloomberg reported. But once Jana Partners got involved, it was game on.
Jenny Hopkinson contributed to this report.