Albertsons tried to buy Whole Foods. Worried CEO took to Amazon instead

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A new book on Amazon Inc. highlights the 2017 purchase of Whole Foods by the predominantly online retail giant. And it details the crucial role the Boise-based Albertsons companies played in the deal.

In April 2017, the Financial Times reported that Albertsons companies were looking to buy Whole Foods, the organic grocer. Then, less than six weeks later, Amazon announced it would buy Whole Foods instead.

Amazon Unbound: Jeff Bezos and the invention of a global empire by reporter Brad Stone has taken a magnifying glass to many Amazon projects and growth over the past decade. The book details how the $ 13.4 billion deal with Whole Foods went down in 2017. And it started with Albertsons.

[Albertsons partners with Google to drive tech innovation for local shopping]

Activist investor

That same spring, Jana Partners revealed to have bought 9% of the shares of Whole Foods, which makes it its first investor. Jana is an activist investor – a company that comes in, buys a large slice of shares, and presses management to make changes. And, according to Stone, executives were concerned that Janna wanted the company to sell to Albertsons.

“Whole Foods executives were concerned that Jana’s plan was to merge the organic grocer with another food giant… Albertsons Companies, a merger of traditional supermarket chains like Safeway and Vons,” Stone wrote.

Jana played a role with a similar idea a few years ago. He bought a significant stake in Safeway, just as the discussions between this Californian grocer and Albertsons began to heat up. Albertsons then bought Safeway and began to merge the companies.

According to Stone, the plan was for the combined company to take the Whole Foods brand name and “a relatively low debt balance sheet,” but “likely swap” Whole Foods management in favor of Albertsons executives.

Albertsons tried several different avenues to take the company public in the latter half of the 2010s. After finalizing the Safeway merger, it announced that it would take the company public in an IPO in 2015. She then withdrew the idea after many peer stocks started to falter. In 2018, it announced it would merge with drugstore retailer Rite Aid, but this project also failed to materialize under intense opposition from shareholders on the Rite Aid side.

The company’s IPO would give long-time investors a chance to monetize their holdings – some dating back to the stores split in 2006 in a complex transaction involving Supervalu and CVS.

A tie-up with Whole Foods, like the 2015 IPO attempt and the 2018 Rite Aid merger would do that, but it wasn’t meant to be either.

Attempt to Hail Mary

Founding CEO John Mackey was hoping to save his job – and took several steps this spring to keep Whole Foods out of Albertsons’ fold. According to a former board member quoted in Stone’s book, Mackey made changes to the board and sought a “white knight” to buy the troubled grocer – including private equity firms. , Warren Buffet and others.

Then the Hail Mary. Amazon.

[Albertsons CEO Sankaran on the record: On Boise, the pandemic, Amazon — and working in the stores]

“There was one option left, which almost everyone at Whole Foods Market saw as fancy. Over the years, they had engaged in several fruitless conversations with Amazon, ”Stone wrote. When Bloomberg News reported that Amazon executives recently discussed the acquisition of Whole Foods, Mackey asked one of his advisers to make a phone call and try one last time to save the company. . “

In 2017, Amazon entered the grocery business and opened a few small physical retail stores. But the 1990s dot-com startup known for its online marketplace buying a chain of hundreds of grocery stores seemed, at the time, far-fetched.

“Throughout May, as it continued to accept Albertsons’ proposals, Whole Foods negotiated with Amazon in secret, responding to a constant stream of requests for additional information,” Stone wrote. “On May 23, Amazon offered to buy the company for $ 41 a share.”

An Albertsons-Whole Foods deal wasn’t meant to be.

The following

In the years since the deal with Amazon, Whole Foods has remained mostly stuck on sales. Last week the The Wall Street Journal reported This segment of Amazon’s physical stores, which is made up primarily of Whole Foods stores, has seen its revenue decline every year since 2018 – the first full year after the merger.

“(Whole Foods) the 16% year-over-year drop in revenue in the March quarter was the worst on record for the company,” the WSJ reported, saying foot traffic to Whole Foods remained in decline.

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In the corresponding quarter, Albertsons saw its sales increase compared to the previous year, thanks to an 11.8% increase in same-store sales.

Albertsons has finally found a way for longtime shareholders to monetize their stake in the private company, having made it public last summer in a second IPO attempt. After a slow start, the company action appreciated by more than a third since registration.

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