Amazon buying Whole Foods, making strong move into groceries

O'Shea was referring to the likelihood that Online delivery of groceries will soon be more widely accepted by consumers. Amazon.com Inc. will pay $42 per share of Whole Foods Market Inc. On Friday, WalMart announced it is buying men's online clothing retailer Bonobos for $310 million.

"This is just a continuation of Amazon and some of the technology that they own that's going to continue to be disruptive", said Scott Vali, vice-president of equities at CIBC Asset Management.

Investors like the deal and think it will be good for the online retail giant, which has been expanding its grocery offerings.

Whole Foods, founded in 1978, has struggled to differentiate itself as competitors and has cited pressure from restaurant chains, meal-delivery companies and traditional supermarkets.

The deal comes a month after Whole Foods announced a board shake-up and cost-cutting plan amid falling sales.

Groceries are already a fiercely competitive business, with low-priced rivals like Aldi putting pressure on traditional supermarket chains and another discounter, Lidl, opening its first USA stores just this week. Bucking broader declines on news of the deal, Amazon shares surged 3 percent while Whole Foods shot up 27.2 percent.

Jana Partners bought more shares in April, becoming Whole Foods' second largest shareholder, to agitate the company's executives for further changes. Shoppers skip the checkout line, and their Amazon accounts get automatically charged.

The deal has the possibility to be "transformative", Moody's lead retail analyst Charlie O'Shea said in a note, "not just for food retail, but for retail in general". Traditional grocery stores, such as Kroger and Safeway, have also widened their organic food selections in hopes of retaining customers who are increasingly looking to eat healthy. Mackey is famous for growing Whole Foods from a tiny health-conscious grocer in Texas far from the USA coasts into a giant in upscale foods.

Benchmark 10-year Treasuries were last up 2/32 in price to yield 2.153 percent, compared with 2.162 percent late Thursday.

With Whole Foods, Amazon gets an established business that it can transform through its technology and supply network expertise. 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. Whether Whole Foods' store-brand products will be offered as part of Amazon's delivery services, and whether the organic grocer's notorious prices (hence the "Whole Paycheck" nickname) will dip a bit to fit my budget.

  • Salvatore Jensen