About the deal
Amazon (AMZN), the world’s largest diversified online retailer, announced on Friday, June 16, 2017, that it has entered into a definitive agreement to acquire Whole Foods Market (WFM) for $13.7 billion in an all-cash transaction. The online retailer agreed to pay $42 per share for Whole Foods, representing a 27.0% premium to Whole Foods’ previous day’s closing price.
“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’s founder and CEO (chief executive officer).
John Mackey, Whole Foods Market’s co-founder and CEO, said, “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.”
Impact of the deal
The deal sent tremors in the US food retail sector on fears of further price cuts in an already struggling grocery market sector. Stocks of supermarkets Kroger (KR), SuperValu (SVU), and Sprouts Farmers Market (SFM) fell 9.2%, 14.4%, and 6.3%, respectively. Big-box retailers Walmart (WMT), Target (TGT), and Costco (COST) fell 4.7%, 5.1%, and 7.2%, respectively.
Whole Foods’ investors, on the other hand, had an excellent day. The stock rose 29.0% to close at $42.68, crossing the bid price of $42. Amazon inched 2.4% higher and closed at $987.71, adding $11.0 billion to its market cap.
If you’re looking for exposure to Amazon and Whole Foods Market, you can invest in the Van Eck Retail ETF (RTH). RTH invests 17.7% in Amazon and 1.7% in Whole Foods.