Amazon (AMZN) has put the screws to Whole Foods (WFM) and all those hoping for a bidding war. Amazon forced Whole Foods into a closed bidding process, making an offer of $42 a share or nothing. Whole Foods wasn’t allowed to run a bidding process to try and get the highest and best offer.
With Amazon’s proverbial buyout price being $42 a share, and with that information now being public, other bidders might get more active on taking a look at Whole Foods. Still, the $42 a share offer might have been the best that Whole Foods could do anyway. Albertsons, the private equity owned grocer, offered a merger of equals that would’ve valued Whole Foods between $35 and $40 a share.
The problem was, Whole Foods short-changed its investors by agreeing to not open up bidding because a deal with Amazon would mean Whole Foods’ CEO John Mackey could keep his job.
Whole Foods did try to get $45 a share out of Amazon, but the internet giant balked and threatened to walk away from the deal. As well, Amazon reportedly had its eye on other buyout opportunities. What were those other opportunities? By all accounts, it could’ve easily been Sprouts Farmers Market (SFM) – the smaller organic grocer, but not necessarily big enough to move the needle for Amazon. Or it could’ve been Kroger (KR), the mega player in the middle market grocery industry. Yet, at $30 billion, that might’ve been too big for Amazon to swallow at this stage.
Other bidders weren’t allowed to make an offer but might still be interested. Especially knowing that Amazon has “no” interest in paying more than $42 a share. Whole Foods shareholders hoping for a bidding war might not get it, but they might get a higher offer. Then you still have activist investor JANA Partners with an 8% stake – they’ll surely be pushing Whole Foods to take the best offer it can get. But in my opinion, the likelihood of someone coming in and stealing Whole Foods away for $43 or $44 a share remains slim.