Daily Management Review

Regulatory Filing Shows Whole Foods Was Cornered Into Not Seeking More Bids By Amazon


07/08/2017




New light on the $13.7 billion acquisition was shed after a regulatory filing showed that in a sale process for the U.S. grocer that involved other bidders, Amazon.com Inc had told Whole Foods Market Inc it would not engage in.
 
In order to convince Whole Foods to accept a sale process that would not result in a bidding war, how Amazon used its deep pockets and brand as leverage is shown by the previously undisclosed details on the negotiations.
 
Based on investor expectations of a higher bid, for the first few days after the agreement was announced on June 16, Whole Food shares traded above Amazon's $42-per-share deal price. But as such hopes dampened, they have since traded slightly below that price.
 
After it received expressions of interest from two other companies and four private equity firms, Whole Foods agreed to forgo an auction process, the regulatory filing shows.
 
None of these parties are identified by name. Valuing Whole Foods at between $35 and $40 per share, the filing refers to a 'company X,' which proposed a merger of equals. A source familiar with the matter said that U.S. supermarket chain owner Albertsons LLC is company X. there were no comments available from Albertsons.
 
The filing said that in part because Amazon was "very sensitive with respect to confidentiality" and did not want to compete in a broader sale process, Austin, Texas-based Whole Foods agreed not to pursue this, or solicit any other bids nevertheless.
 
Calling it its "best and final offer", Amazon but settled for $42 per share, even though Whole  Foods said in the filing that it had sought $45 per share from Amazon. According to the filing, Amazon had offered $41 in May.
 
In case its final offer was turned down, it was considering other opportunities, Amazon had also told Whole Foods. if there was any leak or rumor of its interest in Whole Foods, Amazon reserved the right to terminate the talks, the filing added.
 
With an interest in exploring a commercial relationship, such as a supply arrangement, the other company that expressed interest in Whole Foods, referred to in the filing as 'company Y.' According to the filing that company did not discuss any merger or acquisition.
 
As the price proposed by Amazon likely exceeded the amount a private equity buyer could be expected to pay, according to the filing, Whole Foods' management decided not to solicit proposals from the four private equity firms. The management of Whole Foods was under pressure from activist hedge fund Jana Partners LLC to explore a sale of the company.
 
(Source:www.reuters.com) 






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