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Why Amazon Bought Whole Foods for $13.7 Billion

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Amazon will pay $13.7 billion in cash to acquire Whole Foods Market, the once online-only retail behemoth announced Friday, June 16. The deal is generous, valuing Whole Foods at $42 a share, a full 27 percent higher than its closing price on Thursday. Stocks for competitors, like Kroger, Costco, and Sprouts, in contrast, all fell in the wake of the news. So what does the merger mean?

On its own, Amazon has been toying with the brick-and-mortar grocery experience for several months now, rolling out concepts like Amazon Go, which eliminates the checkout process, and AmazonFresh Pickup, the Seattle-only service that treats your groceries like takeout, available within 15 minutes of your order.

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In other words, Amazon really wants you to buy your groceries (and everything else) from Amazon—and since Walmart, which already has a nationwide network of stores, just launched a giant grocery vending machine that seems destined for expansion, the time to get physical is now.

Enter Whole Foods. Amazon’s nearly $14 billion purchase will allow Bezos’ ecommerce company direct access to hundreds of communities with income levels high enough for the regular Whole Foods customer.

And that’s just the beginning. "This is an earthquake rattling through the grocery sector as well as the retail world," Mark Hamrick, senior economic analyst at Bankrate.com, told CNBC. "We can only imagine the technological innovation that Amazon will bring to the purchasing experience for the consumer. Now, we can see in hindsight that its recent dithering around the brick-and-mortar experience, as an experiment, was only a rumbling of the seismic event in the offing."

Not surprisingly, Whole Foods’ price tag struck a chord with customers

One observer hypothesized that perhaps even Bezos himself fell into the Whole Paycheck trap

The deal is set to close later in the year, and Whole Foods CEO John Mackey will continue to operate the brand as a separate division of the company.

Meanwhile, as shareholders rejoice, here’s hoping that the Whole Foods shopping experiences gets a little less whole paycheck, if you know what I mean.

Tags: Grocery, food news