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Amazon said to mull Whole Foods bid before Jana Partners stepped in

LiveMint logoLiveMint 12-04-2017 Spencer Soper

Seattle/New York: Inc., seen as a possible bidder for Whole Foods Market Inc., pondered a takeover of the organic-food chain last fall but didn’t pursue a deal, according to a person with knowledge of the situation.

The e-commerce giant considered internally whether Whole Foods would help invigorate its nearly decade-long push into groceries, said the person, who asked not to be identified because the deliberations were private. The discussions never turned into a concrete plan, according to the person.

Though Whole Foods has long been seen as a buyout target, activist investor Jana Partners LLC set off a new wave of speculation this week when it acquired a stake and urged the company to evaluate a sale.

With a market valuation of $10.7 billion, the ailing organic-food retailer would be an outsized acquisition for Amazon—dwarfing its 2009 purchase of online shoe retailer Zappos for about $1.2 billion. But the deal would turn Amazon into a grocery giant overnight and help it sideline Instacart Inc., a start-up that delivers grocery orders from Whole Foods stores in more than 20 states and Washington, D.C.

Shares of Whole Foods jumped as much as 5.8% to $35.50 in late trading after Bloomberg reported on the Amazon discussions. The stock was already up 9.1% this year through Tuesday’s close, with most of the rally coming after Jana announced its stake Monday.

Jana’s list of potential bidders includes Amazon, as well as traditional grocery chains such as Kroger Co. and Albertsons Cos., according to people familiar with the firm’s thinking. A private equity suitor also could step in, helping take Whole Foods private and fix its problems out of the spotlight.

‘Strong brand’

Whole Foods remains an attractive asset, even after a sales slump and the loss of market share to mainstream supermarkets, said Brian Yarbrough, an analyst at Edward Jones. “They’ve struggled, but it’s a strong brand,” he said.

Representatives for Amazon, Kroger and Albertsons declined to comment.

Jana, an activist investor with a long track record, announced an 8.3% holding in Whole Foods on Monday and vowed to push for a shake-up. The firm assembled a team of experts, including former executives from Gap Inc. and grocery chain Harris Teeter, to help size up the company’s problems. The group also includes author and food activist Mark Bittman, a former columnist for the New York Times.

Improving the operations could make Whole Foods a more likely takeover target, said Roger Davidson, an industry consultant.

“If they’re looking to sell it, they want to drive up the value,” he said. “Nobody sees a way forward right now.” Bloomberg

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