Amazon Targets Grocery Business with Whole Foods Purchase

Mukesh Buch
16 Jun, 2017
New York City

Amazon agreed to acquire Whole Foods Market, Inc for $13.7 billion. Google faces $1.1 billion fine from the European Commission. Booz Allen is under SEC investigation for its billing practices. Wal-Mart agreed to buy online retailer Bonobos for $310 million.

[R]2:00 PM New York – Amazon agreed to acquire Whole Foods Market, Inc for $13.7 billion. Google faces $1.1 billion fine from the European Commission. Booz Allen is under SEC investigation for its billing practices. Wal-Mart agreed to buy online retailer Bonobos for $310 million.[/R]

Tollbooth Index fell 14.74 to 12,066.88.

Earnings Review

Amazon.com, Inc ((AMZN)) jumped 3.3% or $32.11 to $996.28 after the online consumer products seller agreed to acquire natural and organic foods supermarket operator Whole Foods Market, Inc for $42 per share or about $13.7 billion, including debt.

Whole Foods has been under pressure from activist investors including Jana Partners to sell the company or eliminate much of its capital spending plan. In the last six months, he high priced organic food retailer has been forced to look for a buyer.

However, the feud between shareholders and the company intensified in the last three weeks.

Whole Foods will continue to operate stores under the Whole Foods brand. Mackey will remain CEO and headquarters will stay in Austin.

The transaction is expected to close in the second-half of this year and Whole Foods stock surged 26.8% to $41.92. Currently the organic and natural food retailer

The Amazon and Whole Foods $13.7 deal nearly matches the $13.8 billion deal between Sears Roebuck & Co and Kmart Holding Corp in November 2004.

Whole Foods currently holds less than 1.3% market share in the U.S. grocery industry and Amazon market share is even less than 0.2%. However, with the acquisition, Amazon anticipates offering larger selection of food products and provide stronger logistics and delivery support to a broader customer base.

Alphabet Inc ((GOOG)) slipped $6 to $936.08 on the report that the search engine services provider is facing antitrust fine from the European Commission of about $1.1 billion for allegedly misconduct related to its search, Android and advertising businesses.

The Financial Times reported that the exact penalty expected to announce in the coming weeks and may exceed the record of €1.1 billion.

In July 2016, the commission concluded that “abused its dominant position by systematically favoring its comparison shopping service in its search result pages.”

Booz Allen Hamilton Holding Corporation ((BAH)) tumbled 20% or $7.90 to $31.43 after the management consulting and engineering services provider said that its billing practices are under investigation by Securities and Exchange Commission.

Earlier in this month, the U.S. Department of Justice informed a unit of Booz Allen, according to the posting on the company website that the DOJ is “conducting a civil and criminal investigation relating to certain elements of the company’s cost accounting and indirect cost charging practices with the U.S. government.”

Finisar Corporation ((FNSR)) surged 11.9% or $3 to $28.69 after the optical components provider said revenues in the fourth-quarter ending in April jumped 12.1% from a year ago to $357.5 million.

Net income in the quarter surged to $130.2 million or $1.13 per diluted share from $13.1 million or 12 cents in the same quarter last year.

The network components provider realized in the fourth-quarter non-cash benefit of $103.3 million to the GAAP income tax provision due to the release of a significant portion of its valuation allowance against certain U.S. deferred tax assets.

Finisar forecasted first-quarter revenues in the range of $330 million to $350 million and diluted earnings per share in the range of 37 cents to 43 cents.

Wal-Mart Stores Inc ((WMT)) declined 5.9% or $4.68 to $74.23 after the supermarkets and convenience stores operator agreed to acquire New York-based privately held online men’s clothing retailer Bonobos Inc for $310 million in cash.

The deal is expected to close at the end of the second-quarter or in the beginning of third-quarter.