Amazon is buying Whole Foods, the quite famous retailer selling super expensive organic groceries for a deal worth about $13.7 billion, with a 27% premium. (Bloomberg here).
As you can by the reactions, with the major retailers dropping hard, this is not a good news for almost everybody except AMZN and Whole Food itself (The stock at the moment is up almost 3%, which is pretty rare for acquisitions; WFM meanwhile is up 27%) with a polarising effect on the market.
Amazon has a plan, that is now quite obvious, to gain a monopoly-like share in every sector that is in, and in particular has been trying to build a competitive and vast groceries store. It is also worth noticing that it recently opened its first brick-and-mortar store (mainly books) and this news might mean something related.
Furthermore, 'Premium' sectors tend to be quite profitable, with high margins; but with an economy that on average grows, many people working part-time and with the stagnation that WF has been carrying around for a while, the deal is not as good as it may look like.
Of course, Whole Foods can gain from this deal a superior supply chain to rely on and an international market which is almost completely missing. In particular certain European cities, where Amazon can offer the 1-day shipping matched by the 'quality' of the foods that WFM offers.
My opinion on this is that Whole Foods will end up as a pure and simple brand for Amazon, either online or in the various shops, and nothing more.
We like burning cash.
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