In a dramatic move that promises to shake up the grocery industry, Amazon on Friday announced that it will buy Whole Foods in a $13.7 billion deal.
The deal gives the internet retail giant, which has unrolled a grocery buy-online/home-delivery service in a few major cities, a physical footprint in hundreds of cities across the country.
Whole Foods operates a Wichita store at 13th and Webb.
The companies said in a news release Friday that Amazon will operate the stores under the Whole Foods Market brand. It will continue under co-founder and CEO John Mackey with its headquarters in Austin, Texas.
Help us deliver journalism that makes a difference in our community.
Our journalism takes a lot of time, effort, and hard work to produce. If you read and enjoy our journalism, please consider subscribing today.
The deal is expected to close in the second half of 2017.
But the deal is likely to speed up a reconfiguration of the grocery industry, putting a dent in the operations of existing players. On Friday, the stock price of Kroger, parent of Dillons, dropped 9.2 percent, while Wal-Mart dropped 4.7 percent.
For Whole Foods, the deal represents a chance to fend off pressure from activist investors frustrated by a sluggish stock price. Whole Foods over the past decade led the move into high-quality, organic food, but its growth slowed as traditional grocers responded with similar offerings.
For Amazon, the deal marks an ambitious push into the $670 billion grocery business. There are more than 460 Whole Foods stores in the United States, Canada and the United Kingdom.
The e-commerce giant has been testing a variety of technology-infused retail concepts. It has already made an initial push through AmazonFresh, its grocery delivery service.
Having stores in dozens of cities could allow it to spread AmazonFresh nationwide within a few years.
“The Whole Foods acquisition provides them more physical locations,” said Mikey Vu, a partner at Bain & Co., a consulting firm.
“They’re going to be within an hour or 30 minutes of as many people as possible.”
Under the terms of the proposed deal, Amazon would pay $42 a share for Whole Foods, a 27 percent premium to Thursday’s closing price.