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Businesses The Almighty Buck

Amazon Threatened To Kill Its Whole Foods Deal if the Grocer Started a Bidding War (recode.net) 173

An anonymous reader shares a report: 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. Whole Foods came back with a counterproposal of $45 a share, which got Amazon to increase its offer to $42. But Amazon's bankers from Goldman Sachs then "stressed several times" that the increase to $42 represented Amazon's "best and final offer." Amazon's bankers "also made it clear again ... that Amazon.com would disengage from its efforts to acquire the company and pursue other alternatives and initiatives if the $42.00 per share price were not accepted," the filing said, "and that Amazon.com expected that the company would not approach other potential bidders while the company was negotiating with Amazon.com." Amazon also threatened it would walk away if the talks leaked to the press, which they did not. Translation: $42 or nada.
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Amazon Threatened To Kill Its Whole Foods Deal if the Grocer Started a Bidding War

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  • It's a buyer's market. Amazon could've bought any one of the big grocery chains and the news would've crushed the stocks of all the ones he didn't buy.

    • Not sure that this is true. Whole Foods was/is ostensibly in a different market than most grocery chains are.

      Whole Foods is all about the brand. While this is a recipe for profit, its also fragile as hell. Deep pockets like Amazon could destroy the business by targeting the brand.

      So I think Whole Foods simply chose the win-win option instead of the option where they definitely get hurt.
      • by swb ( 14022 )

        I don't even know if it's about the brand as much as it is about the demographic and the locations.

    • Amazon crushed my Kroger stock by 20% ..... still not happy about that. :(

  • The stock was trading on the open market around $35/share and Amazon spent 20% over retail ($42/share). Seems like Whole Foods "won" the negotiations to me.
    • by Anonymous Coward

      acquirers always pay a "control" premium for a variety of reasons.

    • Re: (Score:2, Informative)

      by Anonymous Coward

      Just because some shares trade for $35 doesn't mean all shares do.

      Once all the shares offered at $35 are bought up the price goes up. Once all the shares at $36 etc. At some point counter parties might notice and begin front running orders. Some parties holding shares may decide not to sell. A board approved $42 price means everyone's shares get converted to a pile of cash.

    • The stock was trading on the open market around $35/share and Amazon spent 20% over retail ($42/share). Seems like Whole Foods "won" the negotiations to me.

      That's about normal for this type of buyout. Imagine how the shares would have spiked had word gotten out about an Amazon buyout. Hence Amazon's silence dictum.

    • by AvitarX ( 172628 )

      The market price is the lowest price a current holder is willing to accept.

      A buy out is the amount the shareholder that wants the most is willing to accept.

      Of course it's higher.

  • by Anonymous Coward

    What kind of world do we live in where such tactics are permitted. Thank you to whatever click-seeking phony outrage merchant exposed this horrendous state of affairs!

  • If Whole Foods had a bonafide better offer, they would have taken it.

    Not too many players out there with $14B+ to spend on a 20% premium over market price.

    Whipping the whole thing up in the press would have created a temporary spike in the share price, probably higher than $42 per share, but it would have been short lived, and people with $14B+ to invest know this.

    • by mark-t ( 151149 )

      Not necessarily... they *could* have been collecting bids from multiple sources and then given all parties a chance to increase their based on the highest offer so far, doing only one round of that before accepting the highest bid.

      Not that I think that's what actually happened in this case, however. I think Whole Foods' counteroffer comes solely from the knowledge that Amazon has deep pockets, and they are being, to put it bluntly, greedy. I expect if Amazon seriously thought there was seriously anothe

  • 'Amazon's bankers from Goldman Sachs then "stressed several times" that the increase to $42 represented Amazon's "best and final offer."' "Amazon.com expected that the company would not approach other potential bidders while the company was negotiating with Amazon.com." Though I suppose that leaves a lot of details that still need to be settled. Or maybe not, the article doesn't say. Maybe Amazon means "while an offer is on the table".
  • by Anonymous Coward

    That worked once! A guy that loses money, to a company that loses money! Who says a company can't be president! Who!

  • I mean, it's not like Amazon lobbied the government to bring in dozens of other grocery chains from overseas.

  • Really? (Score:5, Interesting)

    by sunking2 ( 521698 ) on Friday July 07, 2017 @05:46PM (#54766641)
    The fact that this is somehow a story that made it to Slashdot goes to show how clueless its readers must be to the workings of the real world. This is nothing unusual. In fact its pretty common practice. Entering into talks is a contract of sorts where both agree to the terms. And those terms seldom weigh in favor of the person who needs to be bought, and make no mistake, Whole Foods was in desperate need of being bought.
    • This is nothing unusual.

      Well, to be fair, Amazon will have to find a REALLY big frame to put Whole Foods in, and it will take a lot of space on the wall. They'll also have to find just the right person to buy it and it will take a while... the best they could do is $42. Now, if there was some letter or documentation for the provenance it would be worth millions.

    • I am usually pretty supportive of articles, and often argue with the "why is this posted on slashdot" crowd but this is truly non-news. There must be something else dramatically more worthy of the front page. This garbage is taking up space we could have used to discuss the new news on the antikythera device

    • Hey, there are plenty of IT weenies here who could learn a thing or two about salary and hours negotiation. Don't overestimate this crowd's business acumen - they often work 30+ hours a week overtime for free.

  • by Anonymous Coward

    What is the 'issue'? That is, why is this newsworthy? Because it involves Amazon? and/or Whole [paycheck] Foods?
    Kudos to WholeFoods directors for trying to get the best price possible. Breakup fees/penalties are typical in acquisitions.
    Again. WHY is this newsworthy (I claim it is not)

  • if you don't give me the red marble you have right away, I will destroy your sand castle you just built in our sand box....

    Kids at play - still....

  • Good for Amazon. If Whole Foods had their way, the deal probably would've had to be signed on artisinal gluten-free organic paper, and management would have to have mustaches and commit to a new wholesome fruit-based lifestyle. I for one, welcome our new ruthless corporate overlords.
  • Why is this (Score:4, Insightful)

    by ghoul ( 157158 ) on Friday July 07, 2017 @06:32PM (#54766891)

    News for Nerds?

    • You must be new here.
    • by Kohath ( 38547 )

      Because Slashdot thinks nerds are dumb, timid, and prone to kneejerk emotional reactions involving lots of clicks and comments. And that assumption has proven correct on many occasions.

      But Trump didn't make any troll-worthy news today and no Silicon Valley douchebags wrote harassment apologies, so this was the best they could do.

  • by raftpeople ( 844215 ) on Friday July 07, 2017 @06:45PM (#54766961)
    Amazon and Whole Foods engaged in a normal negotiation process..
  • If I tell you that my absolute final offer is $42, then of course I'm going to walk away from the deal if you don't agree to it. What part of "Final Offer" isn't clear?

    • Attempting to continue negotiating on price would void the $42 offer. This is not necessarily always the case.

  • What is the story here?
    • by nnet ( 20306 )
      Jerbs. Det tuk er jerbs. Oh and det tuk er 1st amendment rahts, and 2nd amendment rahts. and...and...and...jerbs. Det tuk er jerbs.
  • It was Whole Foods' obligation to get the highest price they could. Unless they have proof that they at least did some sort of timely analysis the management could be liable.
    • by tsotha ( 720379 )
      All they have to show is they believed, at the time, this is the best price they could get. That could be minutes of a meeting.
  • A bidding war you say.. doesn't a bidding war usually involve more than one bidder? Now I may be mistaken as I haven't followed this very closely, and I am assuming that Amazon is the only player here. So under that assumption, Amazon is basically saying.. "if you try to negotiate, we'll walk"? or in layman's terms... take it or leave it, but that's just common business practice.
  • ... on Shark Tank.

  • by Anonymous Coward

    That's absolutely standard in an exclusive, bilateral deal. They're called no-shop / no-talk provisions.

  • It sounds as though Amazon knows what it's doing in negotiations. Why is this surprising or even interesting? They negotiated from strength and got the deal they wanted. Whole Foods got paid and won't go bankrupt. It's a win for both sides.

  • This all seems very normal.

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