1. Two companies get together to talk
2. Company A makes an offer
3. The offer is thought about by Company B
4. Then agreed upon in a handshake deal
5. Company A acquires Company B by buying their stock at a set value
6. Stock shoots up
7. Company B gets bought out and is seeing money #moneyface
Let us piece this together
So first two companies get together to talk, let us stay current and talk about Amazon and Whole Foods. Amazon makes an offer to Whole Foods and Whole Foods think about for a little. They come back and accept Amazon’s offer and Amazon agrees to buy Whole Foods stock at an agreed upon price, this is because the company is publicly traded. Now the stock shoots up to the offer price and Whole Foods is ecstatic because they are cashing out! #moneyface
Amazon Acquires Whole Foods for 13.7 Billion ($42/Share)
Amazon set the whole news into a frenzy this morning stating that they will be acquiring Whole Foods for a whopping $13.7 Billion, or $42 a share. Yes, when a company is public like Whole Foods is, then the company is acquired at a set share price that is then reflected in the market, giving the stock a natural increase in price. Usually, but not all the time are companies acquired for a higher share price than they are trading at.
Amazon has been working on getting into the grocery business for quite some time now with Amazon Fresh and even opening up a few retail test stores this past year but they were having a hard time jumping into this $600 billion dollar industry. But now Amazon owns an established grocery store chain that has locations across the country and now they can implement their speedy shipping and future technology plans with an established market.
Whole Foods, on the other hand, has been struggling to expand their business this past year as more competitors have entered the game. They were really taking a downturn having seven consecutive quarters of declining sales, and their main investors were urging them to make a sale. This sale almost came at a perfect time for Whole Foods and Amazon.
Impact on the Market
The news, sent fear down investors for other retail chains like Target, Wal-Mart, Kroger, and Costco, These stocks tumbled after the news broke. As people worry that Amazon will do to grocery stores what they did the book industry, anyone sees a Barnes and Nobles repeat? Not only have these companies been struggling with competition but also now they have one of the most innovative technology company competing against them. Remember the market is like a bunch of mean girls? So any news will affect stock prices!
Impact on Technology
No one has really mentioned what this will mean for the other technology companies that are involved in making grocery shopping easy. Instacart, a multi-billion dollar company who has a personal shopper to deliver groceries, comes to mind as a company that has a strong grip on their delivery play with Whole Foods. They will now be ousted by Amazon’s own delivery service most likely. Look for Instacart to either get acquired or focus their efforts on the other grocery store chains as Amazon starts to spread its delivery dominates in the grocery industry. Prime Whole foods anyone!?
Amazon and Whole Foods truly came in and shocked the market and public this morning, Jeff Bezos (CEO) has finally found a way to take on his last quest of delivering groceries, time will only tell as we all anticipate to see what innovations they plan to bring to Whole Foods. Regardless of what they do it is important to understand how these moves impact the market and why certain things go up or down and this why you have us here at Orca for.
Note: In no way is this a recommendation to buy or sell any of the companies mentioned, simply an educational article.