Amazon is buying Whole Foods for nearly $14 billion

Amazon is making another move to convert Amazon Prime customers into Whole Foods customers.

The online retail giant announced late Tuesday that all U.S. Prime customers will soon be eligible for a discount of 10 percent on sale items inside Whole Foods stores. The number of items on sale at any given time is usually in the hundreds.

Amazon notified wine sellers on Monday that the company would shut down its Amazon Wine business at the end of this year.

Amazon Wine, which has been around for about five years, allowed wineries and other wine suppliers to sell wine through Amazon.com. Alcohol industry regulations have prevented Amazon from storing and shipping wine itself, but it allowed wine producers to list on Amazon for a fee and then ship orders to Amazon customers.

Amazon has long had a reputation as a hard-ball negotiator. It turns out its negotiations with Whole Foods leading up to its $13.7 billion acquisition agreement were no different, according to an SEC filing outlining a timeline of the talks between the two companies.

On May 23, Amazon made a written offer to acquire Whole Foods for $41 a share, less than a month after the first meeting between senior executives of the companies, the filing said.

Ask a techie in Silicon Valley and you might think Amazon is unstoppable — even when its “store of the future” is just a concept, the commerce world pays attention to Jeff Bezos & company’s every move.

But don’t count out that other commerce giant, Walmart, just yet. On the latest episode of Too Embarrassed to Ask, Kara Swisher spoke with Recode’s Jason Del Rey about Amazon and Walmart’s ongoing rivalry, which escalated recently: In June, Amazon announced plans to buy Whole Foods for $13.7 billion on the same day that Walmart confirmed it would buy Bonobos for $310 million.

Amazon’s Friday morning announcement that it was acquiring Whole Foods sent the high-end grocery’s stock soaring. This was bad news for Whole Foods’ grocery competitors, which now face a fierce battle with Amazon.

Target, Kroger, Costco, Walmart, Dollar General, SuperValu and Sprouts lost a combined market value of $21.7 billion in one day — 6 percent of their total worth, according to data from FactSet.

Amazon’s acquisition of Whole Foods is great for Whole Foods and bad for every other supermarket. The $13.7 billion deal — Amazon’s biggest buy yet — has sent Whole Foods’ stock up $9 or 28 percent today, compared with yesterday’s closing price.

For contrast, Costco’s stock is down $10 or nearly 6 percent. Stock prices are also down for Kroger, Walmart, Target and SuperValu.

Amazon’s acquisition of Whole Foods is its biggest buy yet. It’s also a deal that would never have been possible when Amazon went public 20 years ago. At the time, Amazon was worth $505 million, whereas high-end supermarket Whole Foods was valued at $824 million, according to data from FactSet.

The two companies’ market capitalization remained somewhat comparable through Amazon’s first decade as a public company. Then, in 2009, Amazon’s value began to take off as the online retailer gobbled up market share from traditional brick and mortar retailers. These days, Whole Foods, with a market cap of $13.4 billion, looks like a bargain compared to Amazon, worth $475 billion.

Amazon’s $14 billion deal for Whole Foods gives it more than just groceries. It also gets it crucial real estate it needs to accelerate its delivery operations.

Amazon took a big leap into the grocery industry when it announced its intention to buy Whole Foods for $14 billion.

You might have been surprised to learn Friday morning that Amazon is buying Whole Foods for nearly $14 billion. One person who was not surprised: Our latest Recode Decode podcast guest Scott Galloway, who predicted this deal in an interview we taped on May 11:

“Everyone looks to Amazon for leadership and I’ve been predicting they were going to go into stores for five years,” Galloway said on the podcast. “I can’t even really legitimately say I’m right, because they don’t have a lot of stores yet. They haven’t found a model that works for them yet.”

Amazon is buying high-end grocery chain Whole Foods for almost $14 billion. If the deal closes, pending regulatory approval, this would be the biggest acquisition in Amazon’s 23-year existence.

At $13.7 billion, it’s $12.7 billion bigger — more than 14 times — than Amazon’s acquisition of online shoe store Zappos in 2009, then Amazon’s biggest buy, according to data from Thomson Reuters. Amazon also spent around a billion dollars for Twitch, a video game streaming service, in 2014. But this is much different, and much larger. (And perhaps a sense of Amazon’s appetite for other big deals. It also looked at Slack, the business chat startup, which could command around $9 billion.) Amazon this year also bought online retailer Souq.com, but the deal value hasn’t been disclosed.

Amazon’s brazen bid to buy Whole Foods for $13.7 billion will bring the e-commerce giant toe-to-toe with President Donald Trump, who once slammed the company as a threat to competition — and threatened it would have such “problems” under his watch.

On the surface, Amazon and Whole Foods are just at the beginning stage of a deal that is expected to take months to close: They will have to submit their merger to approval by government regulators, and either the Justice Department or the Federal Trade Commission will lead the investigation.