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You are here: Home / Business Briefing / Amazon Buys Whole Foods for $13.7B
Amazon Inks Its Biggest Deal, Buying Whole Foods for $13.7B
Amazon Inks Its Biggest Deal, Buying Whole Foods for $13.7B
By Jef Cozza / Sci-Tech Today Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
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 marks an enormous step for Amazon, moving the company from being a predominantly web-based retailer to one that operates physical stores too.

Amazon has experimented with the occasional pilot bookstore or grocery store in the past. But today's development will bring it more than 430 retail locations across the country, a substantial base from which it can expand its empire into the physical realm.

Amazon's Biggest Deal Yet

The acquisition also represents the single largest deal Amazon has made to date. Its second largest was for the purchase of Twitch, the videogame streaming service, which it bought for a scant $970 million in 2014.

The company has demonstrated an interest in the retail grocery store space for some time. It had previously announced plans to open a 1,800-square-foot store called Amazon Go in Seattle, Washington. The store would have operated without cash registers for a "checkout-free" shopping experience. Customers would have needed an Amazon account and a smartphone running the Amazon Go app to shop there. The app would then have automatically charged whatever products they took out of the store with them to their Amazon account.

But the company had been forced to delay the store's launch, which was originally scheduled to open earlier this year, after experiencing technical difficulties with the cash register-free system.

Five-Minute Deliveries

For Amazon, the Whole Foods acquisition does more than just leapfrog over the technical difficulties it has had in implementing its grocery plans. The addition of hundreds of physical retail locations could also represent a game-changer for the company's ability to deliver products to customers in ever-shorter time frames. Analysts say the Whole Foods footprint and distribution channel could theoretically make 5-minute deliveries a reality.

While the news came as a surprise to most observers in both the technology and retail sectors today, it is apparently a move Amazon has been contemplating since at least last fall, when it first considered acquiring the organic food company. Although the online retail giant ultimately decided against making a deal then, the calculations apparently changed following the intervention of Jana Partners. The activist investor firm acquired a stake in the grocery chain and had been pressuring it to find a buyer after sales growth had stalled.

By joining forces with Amazon, Whole Foods gains access to an entirely new distribution channel -- which should be good news for anyone hoping to shop for organic kale online.

The deal also allows Whole Foods co-founder and CEO John Mackey to remain as head of the company he started. Whole Foods will continue to operate under its own brand, with the acquisition expected to close sometime in the second half of this year.

Image credit: Whole Foods Market.

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