Amazon-Whole Foods Marriage Could Disrupt Grocery Business (NASDAQ:AMZN)

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Amazon.com, Inc. (NASDAQ:AMZN) has struck a deal to acquire Whole Foods Market, Inc. (NASDAQ:WFM) in a deal valued at around $13.7 billion. The online retailer will pay $42 per share in an all-cash transaction that also includes the supermarket’s debt.

Texas-based Whole Foods Market is engaged in the business of natural and organic foods supermarket. It operates approximately 456 stores in the United States, Canada, and the United Kingdom.

Amazon said that it won’t change the Whole Foods Market brand and stores will continue to operate under the same brand name.

John Mackey will continue working as CEO of Whole Foods Market and the company’s headquarters will stay in Austin, Texas.

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

Following the announcement of Amazon’s plan to purchase Whole Foods Market, Inc. (NASDAQ:WFM), shopping center REITs tumbled more than their peers in the real estate sector.

Wall Street is Happy with Amazon-Whole Foods Marriage Announcement

Belpointe Chief Strategist David Nelson told CNBC that the acquisition of Whole Foods will give Amazon.com, Inc. (NASDAQ:AMZN) “a launching pad not just for food but possibly drugs as well where customers aren’t willing to wait even a day.”

JPMorgan analyst Doug Anmuth believes that the buyout would allow Amazon to be more innovative in delivering the customer buying experience in Whole Foods stores.

“We believe AMZN can work to transform the physical retail experience. We are seeing very early signs here across AMZN Bookstores and the Amazon Go store in Seattle,” Anmuth wrote in a note obtained by CNBC. “The checkout-free experience in Go is not yet ready for prime-time as it is still only being beta-tested by AMZN employees, but we believe the Go technology could be rolled out to physical retail, including Whole Foods, over time.”

Some analysts on Wall Street see the acquisition as the online retailer’s big entry into the food business.

Instinet analyst Anthony DiClemente said in a note quoted by CNBC that Amazon is going to disrupt grocery business. According to the analyst, the grocery industry remains one of the “largest and most under-penetrated markets” for the e-commerce giant.

The acquisition is expected to complete during the second half of 2017, subject to approval by Whole Foods Market’s shareholders, regulatory approvals, and other customary closing conditions.

Meanwhile, in a letter to its customers, Whole Foods Market, Inc. (NASDAQ:WFM) said:

“Amazon is an innovative company and we are excited about our partnership. We believe it presents an incredible opportunity to take Whole Foods Market’s mission and purpose to new levels and will create significant value for our stakeholders – including you, our most loyal customers.”

Amazon and Whole Foods Market Stocks

Shares of Amazon were trading up 2.44% in after-hours trading. The stock is up more than 31% so far this year.

Whole Foods Market’s share price rose more than 29% on Friday. Year-to-date, the stock is up nearly 39%.

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