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Amazon to buy Whole Foods Market for $13.7 bn

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New York (AFP)

Amazon is once again shaking up the retail sector, with the announcement Friday it will acquire upscale US grocer Whole Foods Market, known for its pricey organic options, in a deal that underscores the online giant's growing influence in the economy.

In the $13.7 billion, all-cash deal, Amazon will buy the Texas-based champion of organic and specialty food for $42 a share. Whole Foods' shares traded in the mid-$30 range for May and early June.

Whole Foods, which has faced pressure from activist investors, will continue to operate stores under its brand and will be led by co-founder and chief executive John Mackey, the companies said.

"This partnership presents an opportunity to maximize value for Whole Foods Market's shareholders, while at the same time extending our mission and bringing the highest quality, experience, convenience and innovation to our customers," Mackey said.

The announcement had immediate and punishing consequences on Wall Street for retailers, such as Wal-Mart Stores, that sell groceries and are expected to face even tougher competition with Amazon now much more active in the space.

In May, under pressure from Jana Partners, Whole Foods replaced five board members and its chief financial officer. The hedge fund said the company was undervalued and needed to overhaul its operations and consider "strategic alternatives," code for a sale.

Mackey, who has viewed Whole Foods as a "mission-driven" company in improving American food, castigated Jana as an example of craven capitalism. Mackey is famous for growing Whole Foods from a tiny health-conscious grocer in Texas far from the US coasts into a giant in upscale foods.

"These guys just want to sell us, because they think they can make 40 or 50 percent in a short period of time," Mackey told Texas Monthly in a profile published this week.

"They're greedy bastards, and they're putting a bunch of propaganda out there, trying to destroy my reputation and the reputation of Whole Foods, because it's in their self-interest to do so."

- Seismic event -

The deal is the latest big move for Amazon and its charismatic chief executive Jeff Bezos, who grew Amazon from a small online bookseller in the 1990s into a global retail behemoth that delivers a wide range of goods and creates award-winning entertainment broadcasts.

"Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy," Bezos said.

"Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades -- they?re doing an amazing job and we want that to continue."

As Amazon has grown and Bezos has amassed some $72 billion in wealth, he has spoken more frequently of his public mission, acquiring the Washington Post and investing heavily in the newspaper.

On Thursday, Bezos took to Twitter to request ideas on philanthropy "to be helping people in the here and now, a posting that generated some 18,000 responses.

Analysts viewed the deal with Whole Foods as a seismic event for the sector.

"The retail sector is used to change, but every so often an event occurs that shakes the industry to its core," said Neil Saunders, managing director of research firm GlobalData Retail. "Amazon's acquisition of Whole Foods is one of those."

He said the deal swiftly allows Amazon to quickly build up its business in groceries through buying a well-regarded brand. But "For other grocers, the deal is potentially terrifying."

"Although Amazon has been a looming threat to the grocery industry, the shadow it has cast has been pale and distant. Today that changed: Amazon has moved squarely onto the turf of traditional supermarkets and poses a much more significant threat."

Near 1430 GMT, Whole Foods was up 27.9 percent at $41.95 and Amazon rose 3.1 percent to $993.68.

But Wal-Mart tumbled 6.2 percent, Target 10.1 percent, Costco Wholesale 6.8 percent and Kroger 13.6 percent. Pharmacies that sell groceries were also down, including CVS Health, which lost 4.8 percent and Walgreens Boots Alliance, which fell 4.7 percent.

Food stocks also fell sharply, with General Mills losing 3.2 percent, Kellogg 2.6 percent, Mondelez 2.2 percent and Campbell Soup 3.3 percent.

The Amazon-Whole Foods transaction is expected to close in the second half of 2017 following regulatory approvals and a vote by Whole Foods shareholders.

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