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This May 3, 2017, photo, shows a Whole Foods Market grocery store, in Upper Saint Clair, Pa. Whole Foods Market, which disrupted the supermarket business with its offerings of organic and natural foods, has been unsettled itself by the trends it helped make popular. (AP Photo/Gene J. Puskar)

Amazon is buying Whole Foods and grocery stocks are rotting


You may soon be able to Amazon Prime organic foods. On Friday, Amazon bought Whole Foods Market for $13.7 billion, or $42 a share. This is the largest ever deal for the e-commerce giant. 

"Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy," Amazon Chief Executive Officer Jeff Bezos said in a statement.

The organic food chain will continue to operate under the Whole Foods brand and keep it's Austin, Texas headquarters.

Amazon is buying Whole Foods and grocery stocks are rotting

WATCH  |  With its proposed purchase of Whole Foods, Amazon is poised to rattle the grocery business to its core.

John Mackey, Whole Foods' chief executive officer, said the partnership will allow the company to "maximize value" for shareholders. He will remain on as CEO.

Amazon's stock climbed over 3 percent, while Whole Foods' stock soared 28 percent. 

While investors cheered the buy out, other grocers felt the blow. Kroger dropped 14 percent Friday morning, Sprouts Farmers Market shed nearly 9 percent, Supervalu fell 17 percent, Target dipped more than 8 percent and Walmart was down 6 percent.

Whole Foods' average stock price has hovered at $34. Amazon is buying it for $42 a share.

One immediate plus the deal offers Amazon is real estate.

Activist investors have been after Whole Foods recently to sell itself as its stock has lost some of its luster. CNBC notes that "investors have criticized Whole Foods for its poor performance, and have suggested the chain could be merged with another grocer."

The move comes as Amazon continues to push its way into groceries. Last fall it announced it was testing a new cashier-free convenience store, Amazon Go, and it boosted its online grocery business as well.

The deal is set to close end of year.

People on Twitter certainly saw humor in the deal.

One person joked about how they'll now be able to find tofu jerky near consumer electronics.

Laughs aside, this is the biggest acquisition by Amazon to date.

Here are 3 hints we all missed:

  • Amazon Fresh - it began testing this food delivery service years ago before expanding in 2013
  • Amazon Restaurants - this is it's answer to Uber Eats
  • Amazon Go - this high-tech convenience store is in beta testing, but could redefine how we shop for basic goods

Whole Foods offers Amazon the real estate it needs to stock foods and operate its food delivery services out of. Walmart has already seen success with its click-and-collect service where people buy online and pick up in store. 
Mark Hamrick, senior economic analyst at Bankrate.com, believes consumers stand to benefit, but called the merger "an earthquake" to the grocery sector.

"We can only imagine the technological innovation that Amazon will bring to the purchasing experience for the consumer," Hamrick said.

Moody's analyst Charlie O'Shea said the deal could be "transformative ... not just for food retail, but for retail in general."

Amazon has done it before.

Speaking of Walmart, it scooped up Bonobos for $310 million. Talk about merger Friday.

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