Amazon’s $13.7 billion Acquisition of Whole Foods


 

Overview of the deal

  • Acquirer: Amazon

  • Target: Whole Foods Market Inc.

  • Deal value: $13.7 bn

  • Announcement date: 06/17

  • Acquirer Advisors: Goldman Sachs

  • Target Advisors: Evercore


Amazon, the world’s largest online retailer, is expanding into brick and mortar food retailing with the acquisition of Whole Foods. This move is part of Amazon’s broader plan to diversify their current business interests and leverage their huge network of loyal customers, especially those with Amazon Prime subscriptions, to expand into multiple different markets. We have seen previously expansion into online video streaming, various cloud computing services and even a venture into healthcare.


This acquisition will be Amazon’s first move into the supermarket industry and will look to shake up an already low-margin, high competition industry. Having already caused a paradigm shift in bookselling, retailing and newspapers by incorporating modern-day technology into these industries, Amazon has a good track record to take on the challenge of implementing similar changes into the supermarket industry. Whole Foods has its USP on their organic products, which will appeal to health-conscious millennials for the most-part, but this could pose an issue for national expansion if these products are not adopted by the mass market.


“E-commerce is soaring and food-delivery businesses are taking off because human beings are fundamentally lazy and they don’t want to leave the couch to buy stuff.” -The Atlantic

Company details (Amazon)

Amazon is an American emerging conglomerate whose main product offerings are electronic commerce and cloud computing. Amazon is the largest internet retailer in the world by revenue and market cap.


- Founded in 1994, headquartered in Seattle, Washington

- Chairman, President and CEO: Jeff Bezos

- Number of employees: 566,000

- Market Cap: $815 bn - EV: $815.4 bn

- LTM Revenue: $193.2 bn - LTM EBITDA: $18.5 bn

- LTM EV/Revenue: 4.1x - LTM EV/EBITDA: 42.6x


Company details (Whole Foods Market Inc.)

Whole Foods is an American supermarket chain whose USP is organic food products. They have 479 stores across North America and the United Kingdom.


- Founded in 1980, headquartered in Austin, Texas

- CEO: John Mackey

- Number of employees: 91,000

- Market Cap: N/A - EV: $13.7 bn (Assumed from deal value)

- LTM Revenue: $15.9 bn - LTM EBITDA: $1.2 bn

- LTM EV/Revenue: 0.86x - LTM EV/EBITDA: 11.4x

Projections and assumptions