Amazon to Acquire Whole Foods for $13.7 Billion

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Amazon.com can ship books, furniture and clothing across the Pacific Ocean in what seems like a blink of an eye.

"The goal of all of this is to make it easier to buy", he says. It's more costly and time consuming to deliver individual pieces of fruit to many customers. A handful of analysts have been distasteful on the acquisition the prominent tech company has done; this also puts a ripple on the U.S. grocery industry, its impact will soon follow on its new business venture. Amazon's $13.7 billion acquisition of Whole Foods and its more than 450 retail locations could help it in the competitive prescription drug industry.

That's a significant boost in numbers for the Seattle company, which now operates fewer than 100 distribution centers in the United States. It is a huge shock and a gamble from the end side of Amazon because of the groceries market lackluster profit margin. The service, which is offered to the company's subscription Prime members for a monthly fee of $14.99, is available only in about 20 US cities. Now that it's owned by bargain-friendly Amazon, perhaps the prices at Whole Foods will get a reality check.

"The conventional grocery store should feel threatened and incapable of responding", Wedbush Securities analyst Michael Pachter said. These companies are increasingly looking like Tobacco without the pricing power, since there are so many choices evolving about how and what to eat. Amazon's move aims at the heart of the Bentonville, Arkansas-based retail giant's business - groceries, which account for 56 percent of Wal-Mart's $486 billion in revenue for the year ending January 31.

The deal could also make competing delivery services superfluous.

"Amazon already has an affinity towards supplying foods with strong provenance, organic benefits, or very specific health needs", he added.

"It's like Amazon is taking over the world", she said.

So, the merger with Amazon has saved Mackey's face as well as position. The price shows that at least some traders see a good chance of Whole Foods being valued at substantially more than Amazon has agreed to pay, as the options would otherwise be worth nothing.

Magid Retail Pulse data showed that while 40% of USA consumers use Amazon Prime in some respects, grocery is its least impacted category, as only 13% of Prime users shop for groceries on the site. So we're not cutting back. Analysts at RBC Capital and Cowen, while not effectively downgrading the warehouse-club giant, did single out Costco as a potential casualty in Amazon's big push into physical retail of groceries.

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Whole Foods shares were advancing 1.07 percent to $43.13.

One- or two-hour grocery delivery may also become the norm, Smith said.

"Whole Foods Market has been satisfying, delighting and nourishing customers for almost four decades - they're doing an awesome job and we want that to continue".

"Retweet if you've also spent $13 billion at Whole Foods", quipped the comedian Chelsea Handler.

"Look at companies in the sharing economy".

In an email to customers titled "exciting news", Whole Foods vowed to keep quality high.

If the expectation was that the company would indeed be purchased for $42 per share in cash, we could expect shares to trade right around that price (given that on one hand, a mild discount to takeout price can be expected given that money received later is less valuable than money received now, but on the other, Whole Foods pays a moderate dividend yield). The more touch points you have with a consumer, the more you'll be able to sell them everything else.

"You don't shop for appliances multiple times a week".

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