Markets Right Now: Grocers plunge on Amazon deal; Dow gains

Share Inc said Friday it would buy United States organic supermarket chain Whole Foods Market Inc for $13.7 billion, including debt, marking the internet retailer's largest deal and biggest foray into the brick-and-mortar retail sector.

A crowded local grocery market became more interesting - and probably more competitive - as online retail powerhouse Amazon announced Friday that it will buy organic foods specialist Whole Foods, which now has stores in Washington Twp., Mason and Cincinnati.

The relationship between Instacart and Whole Foods dates back to 2014 but deepened in 2016, when they announced a new five year deal. Shares of Whole Foods rose 29 percent, to $42.68, above Amazon's offered price.

Amazon (AMZN) stock also jumped 2.44 percent to $987.71 on Friday on traded volume of 11.47 million shares versus average volume of 3.74 million shares.

The deal valued at $13.7 billion unites the company that persuaded people to buy books - and then everything else - online with the grocery-store chain that fell behind as shoppers found "good enough" alternatives to the organic and natural foods it helped popularize. Whole Foods chief executive John Mackey would remain CEO after the purchase, and the company would keep its headquarters in Austin.

Whole Foods will continue to operate under its own brand, with the acquisition expected to close sometime in the second half of this year.

The investment banks that advised Amazon and Whole Foods on this deal (Goldman Sachs, Evercore Partners) will surely make tidy sums if it is approved.

Some investors may be wondering whether Amazon could disrupt grocery stores the way it upended the bookstore business. Many stocks, including Target and Smart & Final Stores, were plummeting more than 10 percent before evening out later in afternoon trading.

$3B: Drop in food and drink sales at America's brick-and-mortar stores during this year's first quarter.

But in the hands of Amazon it would be a potent weapon against archrival Wal-Mart, the world's largest retailer, which dominates the grocery world and has been stepping up its e-commerce.

Morgan Stanley analysts wrote in a report on Friday that Whole Foods "creates an entry point to drug delivery" and provides the necessary real estate. Those stores solve much of Amazon's "last mile" delivery challenge for fresh groceries.

Walmart has been trying to address some of those online threats, pushing harder into online to build on its strength in its stores and groceries.

"We're seeing momentum in the business as we expand our value proposition with customers and it's incredible to see how fast we're moving", said Mr. Lore. We hope that won't be the case with this proposed acquisition of Whole Foods.