The e-commerce giant Amazon is out to buy the Whole Foods Market Inc. for a price of $13.7 billion in the U.S., in order to turn the traffic into their offline store around the country. It is Amazon’s way to upend the struggling U.S. retail industry, which Amazon has tried at a very apt situation.
It is one of Amazon’s efforts to go ahead with the brick-and-mortar outlets where Amazon aims to overwhelm the similar experience to its consumers as it did for its online. The takeover will hold around 456 stores reaching the consumers which will have a check on the prices of the grocery stock held by the stores. Amazon has involved technology for good and various valid reasons, one such would be the use of its goodwill to tap the market with strong and intense lookout.
Gordon Haskett analyst Chuck Grom said “The ramifications for all of retail are seismic – not just retailers that sell grocery, but for everyone”.
The shares of the supermarkets, food producers, payment processors and shopping malls lost on its market value which amounted to at least $35 billion. This happened on Friday and it made news across the financial markets.
The market also saw the ‘swooning ‘ of shares of grocer Kroger Co to 9.2 percent and Wal-Mart Stores Inc’s to 4.7 percent. This was probably an indication of the scary environment created by Amazon’s decision. Maybe there was a notion or belief in the market about the prices predictably being cut down by Amazon and the fact that company might widen up the Whole Foods’ product mix.
On the other hand, the shares of Amazon rose from 2.4 percent to $987.71 along with its market capitalization being $11 billion.
Mickey Chadha vice president and senior credit officer at Moody’s Investors Service referred on the above state as follows – “Supermarkets will now have to contend with not only compete with each other and non-traditional grocers like Wal-Mart Stores Inc and Target Corp, but with a retailer like Amazon which has the financial capacity to price aggressively.”
It was agreed by Amazon to pay $42 per share in cash for Whole Foods, and 27 percent premium on the Austin, Texas-based grocer who had offered the closing share price, this being revealed on Thursday.
Again, the company has a sector called as Amazon Go which is a prototype store inside Amazon’s corporate office in Seattle that uses sensors and tech-savvy cameras to gauge the selections done by the shoppers before charging Amazon’s accounts, a source close to this aspect said.
On a final note, Amazon was advised by Goldman Sachs Group who provided bridge-finance to it in this regard. Also, Bank of America Corp joined in to provide finance to Amazon.
At the other end, Evercore Partners Inc. advised Whole Foods.