Monday, November 20, 2017
Business

Amazon to buy Whole Foods Market in deal valued at $13.7 billion

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Amazon said Friday that it had agreed to buy the upscale grocery chain Whole Foods for $13.4 billion, as the online retailer looks to conquer new territory in the supermarket aisle.

For Amazon, the deal marks an ambitious push into the mammoth grocery business, an industry that in the United States accounts for around $700 billion to $800 billion in consumer spending. For Whole Foods, the deal represents a chance to fend off pressure from activists investors frustrated by a sluggish stock price. Amazon is also amplifying the competition with Wal-Mart, which has been struggling to play catch-up to the online juggernaut.

Whole Foods last month unveiled a sweeping overhaul of its board, replacing five directors, naming a new chairwoman and bringing in a new chief financial officer. It also laid out plans to improve operations and cut costs.

With Amazon, Whole Foods gets a deep-pocketed owner with significant technological expertise and a willingness to invest aggressively in a quest for dominance.

Amazon has designs on expanding beyond online retail into physical stores. The company is slowly building a fleet of outlets, and much attention has been focused on its supermarket dreams. It has already made an initial push through AmazonFresh, its grocery delivery service.

The e-commerce giant has been testing a variety of other retail concepts. It has opened a convenience store that does not need cashiers, and has explored another grocery store concept that could serve walk-in customers and act as a hub for home deliveries.

Under the terms of the proposed deal, Amazon would pay $42 a share for Whole Foods, a 27 percent premium to Thursday's closing price.

The company has increasingly experimented with physical stores, opening a small chain of book stores across the country.

But those efforts are nothing compared to the number and size of stores they will acquire through the Whole Foods deal. The grocery chain encompasses more than 460 stores in the United States, Canada and Britain with sales of $16 billion in the last fiscal year.

"The Whole Foods acquisition provides them more physical locations," said Mikey Vu, a partner at the consultancy Bain & Company who leads the retail, technology and digital practices. "They're going to be within an hour or 30 minutes of as many people as possible."

Amazon operates two warehouses in the Tampa Bay region, one in Ruskin and another in Lakeland. Whole Foods Market has three stores in the region, two in Tampa and one in Clearwater. Amazon does not deliver groceries in the Tampa Bay area. Instacart does deliver groceries from Whole Foods in Florida.

Times staff writer Justine Griffin contributed to this report.

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