It came as a surprise when Amazon recently bought Whole Foods. A tech company buying a grocery chain for $13.7 Billion. Amazon’s first ever Billion Dollar Deal.
A recent report suggests that there were other bidders too to buy Whole Foods. Reuters has identified Albersons Groceries as one such contender, who was interested in buying Whole Foods. Around the same time there were four other private equity firms who indicated they were inclined to discuss a leveraged buyout or investment in Whole Foods. But Amazon had pressurized Whole Foods to not talk to the other bidders. Amazon was very sensitive to confidentiality and did not want to bid in a broader sales process.
Around then, the grocery store chain CEO John Mackey, came across a media report that suggested Amazon once had considered acquiring them. Following that he asked an outside consultant to make a phone call to introduce the two parties.
After series of conversations with Peter Krawiec, Amazon’s VP of Worldwide Corporate Development, the companies wound up signing a non-disclosure agreement and met in Seattle on April 30. They discussed strategic possibilities, but up until then an offer wasn’t made.
Whole Foods also reached out to Albertsons to schedule a meeting but remained in contact with Amazon. It was around this time that Whole Foods received another inquiry from an undisclosed “Company Y.”
They met with Albertsons on May 18. Albertsons told Whole Foods that a possible acquisition would value the company between $35 and $40 per share. Later that day Whole Foods also, had a conversation with “Company Y,” but there was no offer discussed or disclosed.
By May 23, Amazon made an offer for $41 per share to buy Whole Foods. In the letter, it said that Amazon reserved the right to terminate discussions if there was any leak or rumor of its interest in acquiring the company.
Thus, Whole Foods decided not to pursue talks with private equity firms as it were afraid that there would be possible reports in the media. Later, they went back to Amazon asking for $45 per share. Amazon countered with $42 per share, describing their offer as the best and final offer.
On June 1, Whole Foods told Amazon they agreed to the deal and the due diligence process was underway. The transaction documents were completed by June 15. The final announcement of the merger was made on June 16.
The acquisition took many people by surprise, not only because a tech company was buying a grocery chain, but also because Amazon traditionally made smaller deals. Additionally this $13.7 billion deal was the first time Amazon has made a purchase of over $1 billion. Amazon’s $970 million purchase of Twitch was their largest previous deal.
The acquisition undoubtedly suggests that Amazon is committed to building out its grocery business. They have already been making deliveries through Amazon Fresh and are introducing brick-and-mortar stores, too.
But while the deal has been announced, it has not yet closed. Pending regulatory approval, the deal will be completed later this year.