Amazon Inc announced on 16th June 2017 to acquire grocery store chain, Whole Foods at a valuation of USD 42 per share, total deal is valued at USD 13.7 billion. Amazon has offered a premium of 28% to Whole Foods shares which closed at USD 33 on 15th June 2016. This deal will help Amazon to acquire market share in the grocery business, which is valued at USD 800 billion, as of now Amazon delivers groceries via its Amazon Fresh delivery business.
Whole Foods Market Inc is a super market chain in the US, which exclusively sells foods without artificial preservatives, colours, and hydrogenated fats. As of 2016 Whole Foods operated 438 super marts in US, Canada and UK. Amazon controls 40%-45% online retail sales in US, but the company doesn’t have a significant footprint in online grocery business, this acquisition will boost Amazon’s grocery delivery business and Amazon Prime subscription.
Post-announcement of the deal, Amazon gained over USD 14 billion in its market capitalization, share price of Amazon rose by 2.44% and closed at USD 988. Whereas, Whole Foods shares surged by 28% to USD 43. Amazon shares have risen by 31% (YTD) and Whole Foods shares have risen by 38% (YTD).
The irony is that the biggest acquisition of the online retail giant is a brick & mortar business. Amazon maybe realising that customers do not want to buy everything online or brick & mortar may enhance their online business.