Amazon to buy Whole Foods grocery chain for $13.7B

By Ovunc Kutlu

NEW YORK

E-commerce giant Amazon is buying the high-end Whole Foods grocery chain for $13.7 billion, the company announced in a statement Friday.

Amazon will pay $42 a share for Whole Foods stocks and the company's net debt. The transaction is estimated to be closed in the second half of the year after gaining approval from U.S. regulators and Whole Foods' stockholders.

After the announcement, Amazon shares rose 3.7 percent to $999.5 on Wall Street, while Whole Foods stock price soared 28 percent to $42.15 a share.

The deal is expected to provide Amazon a strong introduction into the $800 billion U.S. grocery market, where retail giant Walmart is increasingly feeling the pressure from Amazon's online retail business.

Amazon's market share of the U.S. retail sector last year was estimated at 34 percent, while Walmart came second with 5 percent, according to Needham & Company's research in April.

The asset management firm also forecasts Amazon's share of retail business to reach 50 percent by 2021.

For Amazon, the deal also represents an opportunity to extend its business from online retail to physical stores.

With some 430 Whole Foods stores across the nation, Amazon is expected to make local deliveries faster via its grocery delivery service AmazonFresh. Amazon had more than 300 million users as of February.

The deal is expected to benefit Whole Foods as well. The firm announced in February that it was closing nine stores and it scrapped the plan to open some 1,200 stores nationwide, due to weak financial results.

The company saw its net income decline by almost 40 percent for the quarter ending Jan. 15, compared to the same period a year ago.

Whole Foods, which specializes in natural/organic foods, will continue to operate under its brand name after the deal, according to the statement.