Amazon to buy Whole Foods Market in $13.7bn deal

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Takeover of organic food specialist marks new push into grocery market after launch of Fresh delivery service

Amazon, the worlds most powerful online retailer, has taken a giant stride into traditional retailing, spending $13.7bn (10.7bn) to take over organic food chain Whole Foods Market.

The all-cash deal could be game-changing for the traditional supermarket business. Amazon has long had ambitions to move into the grocery business and launched its food delivery service, Fresh, in the US 10 years ago. It introduced the service in the UK last year after signing a wholesale deal with British supermarket Morrisons.

Amazon is the fourth biggest business in the US and accounts for 43% of online sales there. Whole Foods, founded in 1980, has about 460 stores, including nine in the UK where it has operated since 2004.

Supermarket share prices in the US and Europe went into reverse after news of the deal, while Amazons stock rose 3.5%, taking it close to $1,000 a share. The online retailers founder and chief executive, Jeff Bezos, is close to overtaking Bill Gates as the richest person in the world.

Amazon share price graphic

Walmarts shares dived 6%, wiping about $13bn off the value of the worlds biggest retailer as the deal ramped up pressure on traditional chains already hit by a rapid change in shopping habits. Shares in the UKs biggest chain, Tesco, and Germanys Metro were also down about 6% each.

This deal is potentially terrifying for other grocers, said Neil Saunders from retail analysis firm GlobalData. Although Amazon has been a looming threat to the grocery industry, the shadow it has cast has been pale and distant. Today that changed: Amazon has moved squarely onto the turf of traditional supermarkets and poses a much more significant threat.

Amazon revenue graphic

Until now, Amazon has had a limited impact on the grocery market. In the US, it still only accounts for less than 0.5% of grocery spending, according to GlobalData.

It only began experimenting with its first bricks and mortar food store in its hometown of Seattle in December last year. Buying Whole Foods will give it a trusted brand and an established network of stores where a basket of goods can be efficiently picked and packed for home delivery in a range of new cities. It will also give shoppers the option of picking up goods ordered online.

Whole Foods revenue graphic

Bryan Roberts, an analyst at TCC Global, said the deal with Whole Foods suggested that Amazon could now look to buy supermarket chains in its major markets which include the UK, France and Germany. He said: This is planting a huge flag that Amazon is incredibly serious about become a significant grocer.

Analysts at Bernstein suggested Morrisons and Sainsburys were possible targets in the UK alongside Ahold Delhaize in the Netherlands and Frances Carrefour.

But Roberts said Amazon already operated partnerships with a number of regional supermarkets in the US as well as Morrisons in the UK and would not necessarily need to buy them out in order to expand. He said the deal was likely to be focused on acquiring access to Whole Foods brands, supply chain and distribution network to power the growth of its Amazon Fresh delivery service.

Some analysts expressed surprise at the tie-up between Amazon, which has traditionally focused on cut-price deals, and the upmarket Whole Foods, which is nicknamed Whole Paycheck in the US. Roberts said the two firms customer bases were likely to overlap substantially.

Bezos said: Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy. Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades theyre doing an amazing job and we want that to continue.

John Mackey, the Whole Foods co-founder and chief executive, said: This partnership presents an opportunity to maximise value for Whole Foods Markets shareholders, while at the same time extending our mission and bringing the highest quality, experience, convenience and innovation to our customers.

Mackey will remain as chief executive and Whole Foods headquarters will stay in Austin, Texas.

Mackeys 0.03% stake in the business, which is listed on the Nasdaq stock market in the US, is worth just over $41m. He is likely to retain a stake in the business.

Whole Foods shares graphic

Whole Foods has had a huge influence on food retail in the US, bringing organic and health foods to the mainstream. But recently growth has stalled.

In February, it announced it would close nine stores in the US after six quarters of decling sales in a row.

The deal with Amazon comes days after Mackey attacked the hedge fund Jana Partners, which had acquired a 9% stake in the retailer. He described Jana as greedy bastards that would have to knock Daddy out if it wanted to take over the company.

Mackey said the business had changed because the more conventional, mainstream supermarkets have upped their game. He added: The world is very different today than it was five years ago.

Amazons move into the grocery market will pile on the pressure for traditional supermarkets around the world which have been affected by shoppers switching to online, smaller local stores and discounters such as Aldi and Lidl.

Lidl is opening its first stores in the US this week as part of a plan to open about 100 by the middle of next year, while Aldi is in the middle of a $3bn-plus expansion plan to take its total number of US stores to 2,000 by the end of next year. In the UK, the traditional big four supermarkets Tesco, Sainsburys, Asda and Morrisons have all lost market share in recent years to the rapidly expanding German chains.

Clive Black, a retail analyst at Shore Capital, said: Amazon is clearly getting into offline as well as online. It is not going to spend nearly $14bn and then close nearly 500 stores. This is going to cause an awful stir in the US and some of those waves will lap into the UK and beyond.

A good fit? How they measure up


Roots Founded by Jeff Bezos in his Seattle garage in 1994. After spending a year building a website and sourcing stock, Amazon opens its virtual doors the following summer, billing itself as the Earths biggest book store with 1m books to choose from.

Value $477bn

Annual sales $142.6bn

Profits $2.6bn

Employs 341,400

Head office Seattle

Blue sky thinking Bezos is pouring his billions into his private spaceflight company, Blue Origin, developing rockets capable of shuttling the paying public into space.

Whole Foods

Roots College dropout John Mackey and his then girlfriend, Renee Lawson, scrape together $45,000 to open a natural foods store in Austin, Texas, in 1978. In 1980 they join forces with like-minded entrepreneurs Craig Weller and Mark Skiles to open the first Whole Foods Market.

Value $13.7bn

Annual sales $15.9bn

Profits $402m

Employs 60,000

Head office Austin, Texas

Blue sky thinking Mackey wrote Conscious Capitalism, which espouses a business philosophy that is good for suppliers, staff and communities as well as shareholders. A long-term vegan, he more recently co-wrote The Whole Foods Diet, which promotes the health benefits of veganism.

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U.S. Stocks Mixed, Dollar Lower on Growth Concern: Markets Wrap

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U.S. stocks eked out a gain, while the dollar weakened with Treasury yields after poor housing data and a slump in consumer sentiment added to signs the American economy’s growth rate may be slower than forecast. Oil rose with metals.

Food retailers led losses in the S&P 500 Index after Inc. agreed to buy Whole Foods Market Inc. The benchmark for American equity pushed into the green in the final minute of trading during an event known as quadruple witching, when futures and options contracts expire. Tech shares slipped, pointing the Nasdaq 100 Index to a second straight weekly decline. The dollar capped a weekly drop after new-home construction faltered for a third month and consumer confidence fell the most since October. Oil pared a fourth straight weekly decline.

Equities largely weathered a week that saw the Federal Reserve hike rates and renewed tumult in Washington that continues to delay the Trump administration’s policy agenda. Data Friday ratcheted up concerns that slower U.S. growth may take hold just as the Fed’s third hike since December lands. Oil’s woes add to slowing inflation. In France, newly elected Emmanuel Macron looks set for an historic majority in the National Assembly on Sunday.

“The data this week has not been encouraging,” said Mariann Montagne, a portfolio manager at Gradient Investments LLC, which oversees about $1.4 billion. “We need to see consumer spending pick up and more confidence across the board before we can get going again. We’re in a weird limbo, coupled with the the summer doldrums. But if we had great numbers coming out, there would be decisions made.”

Read our Markets Live blog here.

Here’s what investors will be facing in the next few days:

  • France completes its election with a second round of voting on Sunday that’s expected to hand President Macron an overwhelming legislative majority.
  • MSCI Inc. announces on Tuesday the results of its 2017 Annual Market Classification Review, including whether the MSCI Argentina and MSCI China A indexes will be added to the emerging-markets gauge.

Here are the major movers:


  • The S&P 500 rose less than one point to 2,433.14 as of 4 p.m. in New York, leaving it higher by 0.1 percent for the week. 
  • The Nasdaq 100 lost 0.3 percent, giving it a 1.1 percent slide in the week. It’s at the lowest since May 19.
  • Amazon climbed 2.5 percent while Whole Foods spiked 29 percent to the highest since April 2015. Food retailers in the S&P 500 lost 5.1 percent.
  • The Stoxx Europe 600 Index rose 0.7 percent, paring its weekly decline to 0.5 percent.
  • The MSCI Emerging Market Index fell 0.1 percent to cap a 1.4 percent decline in the week.


  • The yen rose 0.1 percent to 110.865 per dollar, after dropping 1.2 percent in the previous session, the most since January. 
  • The Bloomberg Dollar Spot Index fell 0.3 percent as the greenback underperformed all Group of 10 peers. It slid 0.3 percent on the week.
  • The euro rose 0.5 percent to $1.1199.


  • The yield on 10-year Treasury notes fell one basis point to 2.15 percent, after Thursday’s four-basis point jump. The rate dropped on Wednesday to 2.13 percent, the lowest level since November.
  • German benchmark bund yields lost one basis points to 0.27 percent.


  • West Texas crude futures rose 0.6 percent to settle at $44.74 a barrel. Oil fell more than 2 percent for the week to cap its longest run of weekly losses since 2015. OPEC member Libya restored production and the surplus in the U.S. shows little sign of abating.
  • Gold rose 0.1 percent to $1,254.82. The metal is heading for a second weekly loss, falling 0.9 percent.

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    U.S. Stocks Slip on Tech Drop, Dollar Up After Fed: Markets Wrap

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    U.S. stocks fell for the fourth time in five days as selling in technology shares resumed. The dollar advanced with Treasury yields, while gold weakened as traders digested the more hawkish tone struck by the Federal Reserve.

    Equity benchmarks slipped from near record levels, technology shares pacing declines. Commodity producers also retreated, as crude fell to a seven-month low and gold slid more than 1.5 percent. European stocks dropped to levels last seen in April. The greenback strengthened and 10-year Treasury yields climbed as the Fed suggested the strength of the labor market will ultimately prevail over weakness in inflation. Emerging-market equities tumbled more than 1 percent.
    Investors resumed selling the major technology shares that have contributed most to equity records this year, as the threat of higher interest rates prompted a shift from growth into value shares. Softening commodity prices did little bolster arguments that inflation will pick up the pace, even as the U.S. labor market remains on strong footing — raising the specter that central bank officials made a policy error.

    Meanwhile, Washington remained in focus as the special counsel investigating Russia’s interference in the 2016 election was said to be planning to interview two top U.S. intelligence officials about whether President Donald Trump sought their help to get the FBI to back off a related probe of former National Security Adviser Michael Flynn.

    Read our Markets Live blog here.

    Here are the key remaining events investors will be watching this week:

    • The Bank of Japan concludes a two-day meeting on Friday. While economists don’t expect any significant changes to monetary policy, they will parse the BOJ’s statement and Governor Haruhiko Kuroda’s comments for clues to the outlook for inflation.

    Here are the major movers:


    • The S&P 500 Index fell 0.2 percent to 2,432.49 at 4 p.m. in New York, paring losses that reached 0.8 percent.
    • Tech shares in the measure lost 0.5 percent, while bond proxies from real estate to utilities led gains.
    • The tech-heavy Nasdaq indexes retreated at least 0.4 percent. The Dow Jones Industrial Average slipped 0.1 percent from a fresh record.
    • The Stoxx Europe 600 Index retreated 0.4 percent.
    • Emerging-market equities tumbled 1.2 percent.


    • The Bloomberg Dollar Spot Index rose 0.6 percent following three days of losses.
    • The yen was 0.7 percent weaker at 110.34 per dollar after climbing 0.5 percent Wednesday.
    • The British pound weakened 0.1 percent to $1.2741 and the euro retreated 0.6 percent to $1.1151.


    • The yield on 10-year Treasury notes rose three basis points to 2.16 percent, after dropping 8.5 basis points Wednesday to 2.13 percent, the lowest level since November.
    • European bonds tracked the move in Treasuries on Wednesday, with the yield on benchmark U.K. bonds rising 11 basis points to 1.03 percent and those of French and German peers increasing six basis points.


    • West Texas crude futures fell 0.6 percent to settle at $44.46 a barrel, the lowest in seven months. It tumbled 3.7 percent in the previous session after data showed U.S. gasoline supplies unexpectedly rose for a second week.
    • Gold futures sank 1.7 percent to close at $1,254.60 an ounce, notching the biggest drop since Dec. 15.
    • Copper fell 0.7 percent to settle at $5,661 a ton on the London Metal Exchange, in a fourth straight decline, longest stretch of losses since March 9.

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