Markets Right Now: Grocers plunge on Amazon deal; Dow gains

Amazon has agreed to buy Austin-based organic grocery chain Whole Foods Market for $13.7 billion or $42 a share in an all-cash transaction and assume the company’s debt

Just two years ago, Whole Foods CEO John Mackey predicted disaster for Amazon's foray into grocery delivery, telling Bloomberg BusinessWeek it would be "Amazon's Waterloo".

Mickey Chadha, an analyst with Moody's Investor Service, says Amazon has been trying to break into the grocery delivery business and that buying Whole Foods gives it access to a high-income group of customers. Groceries are already a fiercely competitive business, with low-priced rivals like Aldi putting pressure on traditional supermarket chains and another discounter, Lidl, opening its first USA stores just this week. At the time, Whole Foods called Instacart its largest partner for online ordering and delivery.

Food and retail stocks floundered on Friday (Jun 16) on news of Amazon's takeover of Whole Foods Market, but the Dow edged to a fresh record on gains in energy shares.

— Target. The retailer fell $2.85, or 5.1 percent, to $52.61.

It has opened up six retail book stores since 2015, as well as Amazon Go in Seattle-a checkout and cashier-free supermarket that automatically charges a customer's Amazon account after they finish shopping. By enlisting Amazon, he gets to keep his job as CEO of the grocery chain. Whole Foods (WFM) shares spiked 27% to $42, Amazon's offer price.

"Amazon is an innovative company and we are excited about our partnership".

Kyle Bunch is with R/GA, a marketing, advertising and consulting firm right across from the Whole Foods headquarters.

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Walmart gets 53% of its sales from food, groceries and things like household cleaning products, according to GlobalData Retail. Amazon has entered into a definitive merger agreement with Whole Foods over the acquisition though, so the sale is mostly a done deal.

Instacart and Whole Foods did not immediately respond to request for comment.

No one knows exactly what plans Amazon has for Whole Foods, but the early thought from the market is that big grocers will be under threat. The store uses sensors to track items as shoppers put them into baskets or return them to the shelf.

Whole Foods Market was founded in 1978 in Austin, Texas.

"Instead of deliver to my home, why not just come down here?"

"Maybe feels hyperbolic but I think it could be one of the biggest acquisitions in the last 20 years in terms of the ability to kind of bring together technological innovation and this sort of physical footprint that Whole Foods has", Bunch said.