Amazon.com Inc said on Friday it would buy U.S. organic supermarket chain Whole Foods Market Inc for $13.7 billion, including debt, marking the internet retailer's largest deal and biggest foray into the brick-and-mortar retail sector.
The deal, which puts a 27 percent premium on Whole Foods' closing share price on Thursday, would could give the grocer a major competitive edge by allowing it to tap into Amazon's massive power to buy and sell goods at a lower cost.
Whole Foods stores will continue operating under their name and brand as a separate unit of the Amazon company.
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“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 founder and CEO, 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.”
Whole Foods recently had come under pressure from activist hedge fund Jana Partners LLC, prompting it to overhaul its board.
"I think that this takes all of the pressure off Whole Foods and gives Whole Foods the opportunity to revitalize that business and of course it stems the criticism from all of these activist investors," said Neil Saunders, managing director of GlobalData Retail in New York.
The deal values Whole Foods at $42 per share. The shares were trading just under that level in early trading, while Amazon's shares were up 0.9 percent at $997.41.
Excluding debt, the deal is valued at $13.39 billion, based on 318.9 million diluted shares outstanding as of April 9.
The grocer will continue to operate stores under the Whole Foods Market brand, the companies said.
John Mackey will continue as chief executive of Whole Foods, and the company's headquarters will remain in Austin, Texas.
Amazon and Whole Foods expect to close the deal during the second half of 2017.