Updated: Amazon to Obtain Whole Foods Markets for $13.7 B In Game-Changing Deal for Retail Property

Analyst: Deal Catapulting E-Tailer Into Leading Ranks of United States Grocery Market is Proof Well-Located Retail Property Will Win Out, Even as E-Commerce Continues Rapid Development

In its very first large-scale push into brick-and-mortar retail, Amazon (Nasdaq: AMZN) revealed this morning it has actually agreed to purchase Whole Foods Market, Inc. (Nasdaq: WFM) in an all-cash merger transaction valued at $13.7 billion.

The historic pairing, together with today’s statement by retail huge Wal-Mart Stores, Inc. that it will buy Bonobos, Inc., a New York-based guys’s clothing merchant that does most of its service online, casts a spotlight on the seismic modifications reshaping the way we purchase items and services.

The transactions reveal the increasing acknowledgement of the interdependence and symbiosis of e-commerce and physical retail. They likewise underscore the heated competition between the country’s retail titans, Amazon and Wal-Mart, as well as Amazon’s recognition that developing a presence in strong retail places, a minimum of in the grocery sector, may be needed to take the fight to its brick-and-mortar rivals across multiple retail sectors.

Under the conclusive contract, Amazon will pay $42 per share to shareholders of Whole Foods, which has had a hard time economically in recent quarters, a 27% premium over its Thursday closing price. The transaction is expected to close in the 3rd or fourth quarter.

Editor’s note: CoStar News will be updating this significant retail and technology story with news and analysis throughout the day.

Amazon in 2015 appeared to be preparing for a significant push into book shops and other physical retail, but defying the forecasts of some analysts, has actually not revealed a major roll out to this day. The ambitious move into the supermarket space would provide Amazon control of the 460 areas in the U.S., Canada and United Kingdom run by Austin-based Whole Foods, which utilizes 87,000 people and reported $16 billion in income for 2016.

‘ Shot Heard Round the World’

The statements were greeted with a lot of commentary by analysts in both the retail and property industries.

Citi REIT equity expert Michael Bilerman described the relocation as a recognition of the long-lasting power of premium, well-located retail real estate.

Bilerman stated the deal is more evidence that online sellers appreciate the power that a brick-and-mortar existence can have as online merchants increasingly have problem with the costs and logistics of both last-mile shipment to shoppers along with product returns and exchanges.

“All this is consistent with our views that high-quality, well-located retail real estate will continue to win out even with ongoing growth in e-commerce,” Bilerman said.

Morgan Stanley & & Co. retail analyst Simeon Gutman noted that while Amazon was anticipated to rake into the physical supermarket space, consisting of reports that it had an interest in opening 2,000 Amazon Fresh grocery stores in the U.S. over Ten Years, “we did unknown in what kind or when.”

“In thinking of other brick-and-mortar classifications, food retail makes good sense for Amazon to go deeper, offered the high frequency of purchases and distinct approach of circulation,” Gutman stated, who explained the offer as the “shot heard round the world.” “Besides auto parts and possibly appeal retail, we do not think there are other categories that are so unique that Amazon would have an interest in pursuing traditional areas.”

While was relatively well known that Amazon had actually planned to pursue a more aggressive brick-and-mortar technique, the small number of bookstore openings up until now have actually been restricted to high-traffic street retail areas, added Bilerman.

“Plainly, Amazon has opted to purchase rather of construct, and in picking a grocer, the seller is acquiring some extremely well-located shops,” Bilerman added.

Under the contract, John Mackey would stay CEO of Whole Foods, established in 1978, and the grocer would continue to operate under its existing brand and maintain its headquarters in Austin.

The partnership is an opportunity to maximize value for Whole Foods investors, a number of which have actually slammed the chain for its sagging stock rate in the intensely competitive U.S. grocer area, while at the very same time leveraging Amazon’s deep pockets and innovation platform.

“Whole Foods Market has actually been pleasing, thrilling and nourishing customers for nearly four years – they’re doing a remarkable task and we want that to continue,” said billionaire Jeff Bezos, Amazon founder and CEO.

The merger has the benefit of “extending our objective and bringing the highest quality, experience, benefit and development to our clients,” stated Mackey, a Whole Foods co-founder.

Updated: 10:30 a.m, 11 a.m., 11:45 a.m. PDT

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