Amazon-Whole Foods Marriage Could Disrupt Grocery Business (NASDAQ:AMZN)

A Wall Street sign near the New York

June 16 (Reuters) - U.S. stocks fell on Friday as Wal-Mart and other retailers were slammed by's biggest foray into the brick-and-mortar retail sector with its $13.7 billion deal to buy upscale grocer Whole Foods.

Amazon is expected to thoroughly transform Whole Foods Stores, expanding them beyond being grocery stores to integrate them into their broader operations, perhaps including technology retail, and online-purchase ability.

In Whole Foods, Amazon is acquiring a company that has recently come under pressure from investors for its lagging performance.

On top of the Whole Foods Market deal, Amazon has unveiled plans for a constellation of book shops around the United States - stepping in to replace the very bricks-and-mortar booksellers it drove out of business with its online offerings. Shares of Whole Foods shot up 29 percent and closed at $42.68 amid the news. Whole Foods shares were trading just under that level in early trading on Friday, as investors saw negligible regulatory risk to the deal closing.

Excluding debt, the deal is valued at US$13.39 billion, based on 318.9 million diluted shares outstanding as of April 9.

Whole Foods Market will continue to operate stores under the Whole Foods Market brand and source from trusted vendors and partners around the world.

Apparently longtime CEO John Mackey will stay the CEO and the headquarters will stay in Austin.

Whole Foods will run as a wholly independent subsidiary of Amazon.

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With this strategy, Amazon is planning to make the prices competitive and attract "more low- and middle-income shoppers" to its retail stores, which may still be located in posh localities.

Whole Foods did not embrace Jana's suggestions.

Following the announcement of Amazon's plan to purchase Whole Foods Market, Inc.

A Whole Foods Market purchase awaits placement in a auto trunk, outside the Jackson, Miss., store Friday, June 16, 2017. Amazon is also experimenting with a "click and collect" model that lets customers buy groceries online and pick them up at new AmazonFresh locations.

For the first time ever online retail giant Amazon is entering the fresh food space and offering a brick-and-mortar experience.

Walmart has been trying to address some of those online threats, pushing harder into online to build on its strength in its stores and groceries. Certainly, it would appear to Cantillon that Bezos sees the future as slightly more nuanced than the vista of couch-bound online shoppers ordering everything from fast food to films online.

Importing Whole Foods' catalog turned out to be a complex endeavor because its inventory varies by region. Who knows how long after that Americans will start seeing Kindles for sale in the Whole Foods checkout and Amazon Echos on display in a new Whole Foods electronics section. However, Whole Foods does not have access to Instacart's financial numbers and analytics.

Walmart, which has the largest share of the US food market, has already been pushing harder into e-commerce to build on strength in its stores and groceries.

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