Shoppers may see big changes after Amazon buys Whole Foods

Online retailer Amazon surprised the tech world - and just about everyone - today with the announcement that it has reached an agreement to acquire the high-end grocery store chain Whole Foods Market for $13.7 billion in a cash and debt deal.

The acquisition is expected to complete during the second half of 2017, subject to approval by Whole Foods Market's shareholders, regulatory approvals, and other customary closing conditions.

Whole Foods will keep on operating its stores under a similar brand, source and utilize similar merchants, and John Mackey will remain its CEO. "Whole Foods Market has been satisfying, delighting and nourishing customers for almost four decades".

The deal will see Amazon in hundreds of physical stores across the country as it fulfills the e-commerce company's goal of selling more groceries to the public.

Some customers said they believe Whole Foods shoppers will quickly adapt if Amazon does widen the online grocery shopping experience.

Amazon already has made inroads into the supermarket business with its AmazonFresh grocery delivery service and a prototype checkout-free Amazon Go brick-and-mortar store, so far only open to employees.

Amazon's deal to buy Whole Foods comes as Wal-Mart is engaged in a price war with rivals such as Aldi and Kroger in the grocery segment, which makes up about 56 percent of Wal-Mart's revenue. The natural foods retailer helped start a trend toward natural and organic foods, but its stock has struggled in recent years and recently the company shook up its board and said it would cut costs. Indeed, shares in competitors sank in early NY trading.

Amazon's stunning takeover of Whole Foods touched off an quake in the grocery world.

Whole Foods, founded in 1978, saw its stock peak in 2013 at $65.24. "Not only does it give them a great brand, not only does it give them the 365 private label brand, but also it now gives them real estate to put all those Amazon lockers in". It caused shares of other traditional grocery giants to sink - Walmart was down 5 percent, Kroger was down 9 percent, Target was down 5 percent, and Costco was down 7 percent.

"I think this is kind of a natural extension of Amazon's business model".

The deal values Whole Foods at US$42 per share.

Jon Najarian, co-founder of the Najarian Family Office, told CNBC in an email there was unusual options activity in Whole Foods Market during the month of April. And Whole Foods shares climbed 29% to $42.68 Friday-more than the $42 deal price-indicating investors expect another bidder may emerge.

  • Zachary Reyes