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Amazon buys Whole Foods grocery chain for £10.7bn

Amazon is to acquire supermarket chain Whole Foods in an all-cash deal worth £10.7 billion, in the internet giant’s biggest foray into the grocery sector to date.



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The companies announced on Friday that Amazon will buy Whole Foods for 42 US dollars per share (£32.80), but will continue to operate stores under the Whole Foods brand.

 

Whole Foods currently has 460 stores across the US, Canada and the UK, with nine of them in Britain.

 

The deal, which includes Whole Foods Market’s net debt, will see John Mackey remain as chief executive of the grocer and maintain its headquarters in Austin, Texas.

 

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

 

"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."

 

The acquisition ramps up Amazon’s stake in the global grocery market following its launch of AmazonFresh, which entered the UK market last year.

 

The internet giant, which has also teamed up with Morrisons in the UK, has now more than tripled its reach to 260 postcodes across London, Surrey and parts of Hampshire.

 

Shares in listed British supermarkets tanked on news of the Whole Foods deal, which will likely see further competition in an already crowded sector.

 

Tesco and Sainsbury's shares sank 3%, while Morrisons fell by 1.5%.

 

Amazon's US-listed shares were up 2.5% in morning trading, while Whole Foods shares skyrocketed 27%.

 

The deal comes a month after Whole Foods announced a board shake-up and cost-cutting plan amid falling sales. The grocery store operator was also under pressure from activist investor Jana Partners.

 

Commenting on the acquisition, Whole Foods chief executive and co-founder John Mackey said: "This partnership presents an opportunity to maximise 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."

 

The deal will still have to pass regulatory and shareholder approval, but is expected to be completed in the second half of 2017.

 

Neil Wilson, a senior market analyst at ETX Capital, said Amazon's takeover is "leaving rivals quaking".

 

"This is a huge development for US retail, yet another signal of the seismic shift in the market caused by the Amazon model.

 

"Amazon looks set to dominate the food sector now just as much as it does non-food. Amazon brings incredible scale and pricing power that will make life a lot tougher for anyone else.

 

"But there are increasingly serious anti-trust concerns - how long until Washington takes note of what's going on and clamps down?"

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