Amazon buying Whole Foods in $13.7 billion push into selling groceries

UPDATE 1-Amazon to buy upmarket grocer Whole Foods for $13.7 bln

Internet retail giant Amazon will buy leading natural and organic supermarket chain Whole Foods in a deal valued at $13.7 billion, the companies announces Friday.

News of the deal sent shares of traditional retailers like Walmart, Target, Costco and Kroger tumbling as much as 13 percent as investors tried to digest the implications of an Amazon-backed grocery chain. Until now, Amazon has largely focused its grocery efforts around its Amazon Fresh subscription service, which promises quick food delivery for online orders.

"They're doing an incredible job and we want that to continue", Amazon founder and CEO Jeff Bezos said.

The merger of Whole Foods and Amazon is expected to close later in 2017 after gaining approval from USA regulators and Whole Foods' stockholders.

The acquisition, which has not yet received approval from the shareholders of Whole Foods Market, adds a 27% premium to Thursday's closing value of its stock. This move is likely to bring more bad news for retailers who have endured many a sleepless night cursing Amazon and its influence on their business.

"The first thing Amazon is going to do in this acquisition is to remove all those third party vendor services".

The Amazon Go pilot store allows customers to choose items and then pay the bill automatically by just walking out of the store, all without going to a cash register. And Walmart shares dropped more than 6 percent to $74.23 a share.

Whole Foods, known for its organic and specialty food will continue to operate stores under its brand and will continue to be led by cofounder and chief executive John Mackey, the two companies said.

"Whole Foods is so expensive - hopefully the prices come down a little", said David Pousho, 47, a middle-school teacher buying pork and ale at the San Jose Whole Foods on The Alameda, for a weekend Father's Day barbecue. The Journal said the acquisition "could make Amazon an overnight heavyweight in the all-important grocery business..."

In an email to customers titled "exciting news", Whole Foods vowed to keep quality high. "I think what they bought was a distribution network", Meyer said.

In a recent interview with Texas Monthly, Mackey called the investors "greedy bastards".

Set up in 1978, Whole Foods, whose stores now span more than 430 locations, has found it hard to attract more mainstream consumers as Walmart and other large chains have stepped up their sales of natural and organic products.

Shares of Amazon were trading up 2.44% in after-hours trading.

Dylan: But there's definitely a lot more going on here than the fact that Whole Foods has 30 locations in MA.

"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. For example, when it comes to buying fresh food, we like to feel, see and touch the fruits and vegetables we're buying.

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