Amazon to acquire Whole Foods for $13.7 billion

Amazon's planned acquisition of Whole Foods puts Walmart, grocery stocks into a tailspin. Kroger plunges 10 percent, Walmart off 5 percent.

Beer case at Whole Foods NYC location. Traders might have needed a 6-pack after today's announcement of Amazon's acquisition of the company. (Image via Wikipedia entry on Whole Foods, GNU license 1.2)

WASHINGTON, June 16, 2017 – In a blockbuster deal, (symbol: AMZN) has said it will add organic grocer Whole Foods Market, Inc. (WFM) to its planet conquering e-retailing empire. Bloomberg lays out the details:

“ Inc. will acquire Whole Foods Market Inc. for $13.7 billion, a bombshell of a deal that catapults the e-commerce giant into hundreds of physical stores and fulfills a long-held goal of selling more groceries.

“Amazon agreed to pay $42 a share in cash for the organic-food chain, including debt, a roughly 27 percent premium to the stock price at Thursday’s close. John Mackey, Whole Foods’ outspoken co-founder, will continue to run the business – a victory after a fight with activist investor Jana Partners that threatened to drive him from power.”

News of the deal immediately kicked off speculation that one or more higher bids might be forthcoming, particularly from grocer-competitors like Walmart (WMT) – off 5 percent Friday afternoon on the news – and food giant Kroger (KR), which plunged a whopping 10 percent on the news. CNBC has more on the rumors:

“Whole Foods shares traded above the $42 price offered by Amazon amid speculation there could be a bidding war for the upscale grocer.

“Analysts said other retailers may do anything to keep the retailer out of Jeff Bezos’ hands.

“Barclays analysts, in a note, said they would not be surprised if a strategic retail buyer tried to steal Whole Foods from Amazon, or at least force the online giant to pay up for the acquisition.

“Whole Foods stock was trading at $42.58 per share in afternoon trading. Barclays analysts said they raised their price target to $48, but they saw an upside price for Whole Foods of as much as $57 per share.”

But, notes the CNBC piece, there’s a sticking point regarding the possibility of any new bidders entering the Whole Foods sweepstakes:

“Whole Foods would be required to pay Amazon a $400 million breakup fee if the deal is broken for another bidder.

“‘We assigned a 40 percent probability to this scenario. Our downside scenario is $42, which is equal to Amazon’s current bid…We believe there is little regulatory risk that would prevent an Amazon/Whole Foods deal from being consummated. We assign a 60% probability to this scenario,’ …Barclays analysts wrote.”

Remaining market action today looks a lot like it did Thursday. Techs remain weak, particularly Apple (AAPL), which is getting hit again, as news hits the wires claiming the iPhone giant is attracting short sellers by the droves. That said, Apple has tended to be a volatile stock under any circumstances, particularly as a new iPhone announcement nears. (The brand new iPhone 8 and upgraded iPhone 7 offerings will likely be announced mid-September, as is Apple’s standard practice.)

To follow our trades, read also: Trading Diary: Dull times, little conviction on Wall Street

We continue to do little with our portfolios, as we remain in seasonal nervousness mode. Energy issues are tempting us again, but we’ve been burned twice in this sector thus far in 2017 and aren’t looking for further punishment this year.

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