Could there be a bidding war for Whole Foods?

22 June, 2017, 09:00 | Author: Delbert Rhodes

The possibilities opened if Amazon is successful in acquiring Whole Foods, said RBC Capital Markets analyst David Palmer, would be "a game-changer in American eating".

At a Whole Foods town hall meeting on Friday, CEO John Mackey gushed about how "utterly amazing" the partnership will be, and said that only good things could come of it. Mackey asked. "It was actually mutual friends set us up on a blind date".

Going full throttle into groceries by announcing a $13.7 billion deal for Whole Foods on Friday, Amazon gets the advantage of using the stores as mini-distribution hubs to deliver items to customers.

The line, according to the transcript, garnered laughter from employees in the room.

It's also not clear if Amazon will sell the technology to other companies - for the sake of being able to profit off this vertical when the competition's already sealed off from its customers anyways.

TheStreet visited three grocery locations in New York's financial district, and of those three, Whole Foods noticeably thrived.

Amazon buying Whole Foods for $13.7 billion
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Those big-box competitors were already disadvantaged by Amazon's captive audience, an estimated 80 million Prime members, who could theoretically order groceries online or task Alexa, Amazon's virtual assistant, to prepare a delivery or arrange for a pickup at the nearest Whole Foods. Its biggest acquisition prior to the Whole Foods deal was that of Zappos.com for $1.2 billion. Amazon has an obvious ability in e-commerce, but retailers such as Wal-Mart and Target have recently aggressively stepped up their digital efforts. I think we coulda talked for 10 hours. "And I think it would be insane to change them", said Jeff Wilke, chief executive of world-wide consumer at Amazon, at the Whole Foods town hall. "Instead, what we may see is an increased use of technology in the supermarket to help us make our shopping decisions and also how we pay for things".

Milstein Properties' Michael Milstein, whose company has Whole Foods as a tenant at 1551 Third Avenue, said he sees three likely motivations for Amazon's deal, with the company possibly looking to implement one or some combination of the three.

Whole Foods also might draw a rival offer from one or more large private-equity firms because "there's a tidal wave of money that's sloshing around" in that industry, said Eric Schiffer, chief executive of the Patriarch Organization, a private-equity firm that isn't involved with Whole Foods. He said they could not "consummate" the marriage until the deal was official, and that it was "not a Tinder relationship".

"Amazon is known to scale experiments very quickly".

Peter Belanger of Newington, Connecticut, who was shopping at a Whole Foods in West Hartford, said he didn't think he'd be interested in groceries online.

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