E-tailer takes giant step into brick-and-mortar grocery space

SEATTLE — Amazon.com Inc. will acquire Whole Foods Market Inc. for $13.7 billion, including debt, in the biggest deal ever for the e-tailer as it continues to encroach on the grocery sector.

Amazon will pay $42 a share in cash for the natural food chain, the companies said Friday. Whole Foods cofounder and chief executive officer John Mackey will continue to run the business.

“Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy,” Jeff Bezos, Amazon’s founder and CEO, said in a statement. “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.”

“This partnership presents an opportunity to maximize 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,” said Mackey.

Whole Foods will retain its name and Austin headquarters. Completion of the deal, expected to close by year-end, is subject to approval by the company’s shareholders, regulatory approvals and other customary closing conditions.

Amazon’s biggest prior acquisition was three years ago, when it agreed to purchase video-game service Twitch Interactive Inc. for some $970 million in cash.

Jefferies analyst Christopher Mandeville said Amazon’s planned acquisition of Whole Foods stands to be “highly disruptive to the entire grocery vertical,” including retailers, distributors and suppliers.

“Whole Foods Markets’ WFM’s relative positioning just became much better. For Whole Foods, the merger will provide a much needed jolt to its digital/online capabilities, while Amazon receives a high-quality brand with a loyal customer base and physical presence that could enable the online retailer to augment/enhance its current food delivery strategy,” Mandeville wrote in a research note on Friday.

Synergies brought by the deal could include improved procurement power, private label, distribution and operational efficiencies, among others, according to Mandeville. “All that said,” he added, “the pending agreement by no means eliminates the significant execution risk that Whole Foods currently faces, and the retailer has a long road ahead before it regains its comp/earnings mojo.”

Editor’s Note: Article updated with analyst comment.