Online retail giant Amazon is making a bold expansion into physical stores with a $13.7 billion deal to buy Whole Foods, setting the stage for radical retail experiments that could revolutionize how people buy groceries and everything else.
Viewed over the long arc of Amazon history, Whole Foods seems like an unlikely fit.
Latham & Watkins corporate partners Adel Aslani-Far and Mark Gerstein are representing Evercore Partners in its role as financial adviser to Whole Foods on its proposed sale to Amazon, while Weil Gotshal & Manges banking partners Morgan Bale and Heather Viets, capital markets partner Faiza Rahman, M&A partner Raymond Gietz and tax partner William Horton are acting for Bank of America/Merrill Lynch and Goldman Sachs, both of which are providing bridge financing for the acquisition of the grocery store chain.
Wedbush Securities analyst Michael Pachter lent weight to that theory.
Moody's lead retail analyst Charlie O'Shea said the deal could be "transformative, not just for food retail, but for retail in general". The Motley Fool owns shares of and recommends Amazon and Whole Foods Market. It announced Friday that it's buying online men's clothing retailer Bonobos for $310 million, following a string of online acquisitions including ModCloth and Moosejaw.
"Amazon is known to drive down prices and make the shopping experience more efficient", Wu said. However, "if they truly keep Whole Foods Market as a separate division and Mackey in place as they say they will, they'd presumably maintain whatever [environmental] stances they already had", said Jon Springer, retail editor for Supermarket News.
Amazon may be keeping John Mackey on as CEO of Whole Foods, but Wall Street is counting on Bezos to turn his biggest deal ever into a tasty meal.
Brittain Ladd, a former senior manager at Amazon who worked on its brick-and-mortar strategy, said Amazon will use Whole Foods to test concepts for the grocery store of the future. Bank of America Corp also provided financing to Amazon, while Evercore Partners Inc advised Whole Foods. Whole Foods itself had launched an offshoot chain named after its "365" private label brand in a nod to the popularity of no-frills chains.
"Amazon's acquisition of Whole Foods is one of those".
The company also has been testing sensors at a convenience store in Seattle to track items as shoppers put them into baskets or return them to the shelf. Get Fully Charged, from Bloomberg Technology.
Amazon has not been shy around its ambitions to expand into physical retail, with leaked internal plans showing that the company wants to open 2,000 grocery stores over the next decade.More news: Johnson Controls International plc (JCI)
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The acquisition could pose a bigger threat to Target, which has been building smaller stores in cities like NY to attract the affluent urban shoppers coveted by Whole Foods and Amazon, said Kurt Jetta, chief executive officer of TABS Analytics, a consumer products research firm.
Wal-Mart, which upended the grocery sector itself when it made a decision to add food to its general-merchandise stores in the late 1980s, has thus far parried Amazon's advances. The two companies have worked closely together.
Whole Foods recently overhauled its board and redoubled cost-cutting efforts, seeking to change a high-price image that has tagged it with the nickname Whole Paycheck.
Amazon could also get a better picture of customers by marrying data from Amazon and Whole Foods' loyalty programs.
On its own, Amazon has been pursuing a number of environmental initiatives in recent years.
This is where Whole Foods Market comes in. Or someone who buys granola bars monthly from Whole Foods and paper towels every other week from Amazon might be offered the items in a single shipment, delivered to the door.
At the end of last week Amazon dropped news of its first significant foray into the world of bricks-and-mortar, telling the United States market the merger of the two companies will involve Amazon acquiring the Texas-based Whole Foods, which has more than 400 locations across the country, at $US42 a share.
"Instead of deliver to my home, why not just come down here?"
Adrienne Anderson, at a Whole Foods in Savannah, Georgia, says she shops at Whole Foods nearly exclusively for meat and fresh produce "because of the quality and selection" and because fruits and vegetables are locally sourced.
That could help Amazon cut shipping costs and give the company opportunities to sell even more products once in the store.