Amazon announced on Friday that it would buy Whole Foods Market in a deal valued at $13.7 billion, and pay $42 a share for Texas-based grocery store chain in an all-cash deal that includes the group’s debt.
Whole Foods CEO John Mackey will stay as the CEO of the grocery store chain after the deal closes, and the store, the organic grocer that was founded in 1978, will keep operating under the Whole Foods brand as the deal is expected to be done in the second half year.
“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,” Mackey said in a statement.
The deal sent a shocking reaction across both the online and brick-and-mortar industries, uniting two brands that weren’t seen as clear partners. But Whole Foods came under pressure to find a buyer this year after activist investor Jana Partners LLC acquired a stake and started pushing for a deal. Jana’s move annoyed Mackey, who has stated Whole Foods as his “baby.” With Amazon in the play, he gets to keep his job as CEO of the grocery chain.
In Whole Foods, it is acquiring a company that has recently come under pressure from investors for its lagging performance. Whole Foods, whose stores now numbers more than 430 locations, has struggled to appeal more mainstream consumers as Walmart and other large chains have stepped up their sales of natural and organic products.
“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. “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.”
Mackey said the he agreed to the deal because it is “an opportunity to maximize value” for the company’s shareholders.
Moreover, Amazon’s biggest acquisition so far came in 2014, when it agreed to buy video-game service Twitch Interactive Inc. for $970 million in cash. The Seattle-based company had about $21.5 billion of cash and equivalents at the end of March, the data show.
Whole Foods closed at $33.06 on Thursday. It opened at $34.85, with a session high of $34.97 and a session low of $32.97. Shares were halted in pre-market trading. Meanwhile, Amazon opened at $958.7 and closed at $964.17, with a session high of $965.73 and a session low of $950.86. Shares of Amazon rose 1.5% to $978.88 in pre-market trading.
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