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Amazon eyes Main Street with $13 bn deal

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New York: Amazon is once again shaking up the retail sector, with the announcement on Friday it will acquire upscale US grocer Whole Foods Market, known for its pricey organic options, in a deal that underscores the online giant’s growing influence in the economy.


The purchase in one fell swoop gives Amazon, which until now has operated almost entirely on the Internet, a big presence in the brick-and-mortar world on Main Street, with more than 450 stores in the US, Canada and Britain.


In the $13.7 billion, all-cash deal, Amazon will buy the Texas-based champion of organic and specialty food for $42 a share.


The announcement had immediate and punishing consequences on Wall Street for retailers, such as Wal-Mart Stores, that sell groceries and are expected to face even tougher competition with Amazon now much more active in the space.


But shares of Whole Foods shot up 27.3 per cent to $42.07, while Amazon jumped 3.0 per cent to $992.91, a gain of $13.8 billion in market capitalisation, slightly more than the deal itself. Whole Foods will continue to operate stores under its brand and will continue to be led by co-founder and chief executive John Mackey, the companies said. The deal is the latest big move for Amazon and its charismatic Chief Executive Jeff Bezos, who grew Amazon from a small online bookseller in the 1990s into a global retail behemoth.


As Amazon has grown and Bezos has amassed some $72 billion in wealth, he has spoken more frequently of his public mission, acquiring the Washington Post and investing heavily in the newspaper.


Analysts viewed the deal with Whole Foods as a seismic event for the sector.


“The retail sector is used to change, but every so often an event occurs that shakes the industry to its core,” said Neil Saunders, Managing Director of research firm GlobalData Retail. But it also creates concerns about competition in the market.


Barry C Lynn, competition policy expert at the New America think-tank in Washington, warned of “America’s Amazon Problem” that has seen one company dominate “every corner of online commerce.” — AFP


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