Investors on Friday effectively handed Amazon.com the $13.7 billion it agreed to pay for Whole Foods Market -- for the moment, at least.
After the companies announced the deal, Amazon’s stock jumped $28.76 a share, to $992.93.
Amazon has about 478 million shares outstanding, according to FactSet Research Systems, so the stock’s gain Friday added $13.7 billion to Amazon’s total market value. (The jump brings Amazon's market value to $475 billion.)
Instacart plans to maintain its relationship with shareholder and business partner Whole Foods despite the upscale grocery chain’s pending merger with Amazon.com.
Instacart, which offers an app to deliver groceries from a nearby store, has cast itself as a competitor to Amazon. It has persuaded grocers, including Whole Foods, to partner by warning them of the day Amazon would declare war on traditional grocery shopping.
Now that the long-awaited day has come, the San Francisco start-up — which has $500 million in the bank — is already seeing once-skittish grocers clamoring to strike a deal as soon as possible.
By acquiring Whole Foods, Amazon is buying not just an established, upscale supermarket brand, but also a vast distribution network of warehouses and more than 460 stores worldwide — replete with back rooms and cold storage — in some of the most affluent ZIP codes in America. That’s a significant boost in numbers for the Seattle company, which currently operates fewer than 100 distribution centers in the U.S., a handful of them in the Inland Empire.
More hubs means quicker and fresher delivery, which will bolster Amazon’s existing grocery delivery service, AmazonFresh. The service, which is offered to the company’s subscription Prime members for a monthly fee of $14.99, is available only in about 20 U.S. cities. While the bid for Whole Foods may not bridge Amazon’s “last mile,” it certainly brings it closer, experts say.
In the U.S. “this adds 440 refrigerated warehouses within 10 miles of probably 80% of the population,” said Michael Pachter, an analyst for Wedbush Securities. “More importantly, it puts refrigerated distribution within 10 miles of probably 95% of Prime members. That means we can rely upon Whole Foods’ consistently high quality meat and produce, and can rely upon prompt delivery from the store as a distribution point.”
Leave it to Amazon’s Jeff Bezos to shake up multiple industries with a single blockbuster press release.
Friday’s announcement that Amazon is buying grocery retailer Whole Foods Market for $13.7 billion in cash rattled grocery stocks, with Kroger, the owner of Ralphs and Food4Less, losing more than 9%; warehouse stores, which have expanded into grocery sales, were also down, Costco by more than 7% and Walmart by nearly 5%.
The entire eCommerce field similarly was thrown for a loop. As is often the case with Bezos’ initiatives, his goals and endgame remain murky.