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Amazon to sell debt to pay for Whole Foods

Amazon says it is selling debt to pay for its US$13.7 billion (A$17.5 billion) deal to buy organic grocer Whole Foods. did not say how much money it plans to raise when it sells the senior unsecured notes, but credit ratings agency Moody’s said on Tuesday that the company is raising up to US$16 billion.

The e-commerce giant announced in June it will buy Whole Foods Market Inc in a deal valued at about US$13.7 billion (A$18 billion).

Excluding debt, the deal is valued at US$13.39 billion, based on 318.9 million diluted shares outstanding as of April 9.

The grocer will continue to operate stores under the Whole Foods Market brand, the companies said.

John Mackey will continue as chief executive of Whole Foods, and the company’s headquarters will remain in Austin, Texas.

Amazon and Whole Foods expect to close the deal during the second half of 2017.

The takeover would give the e-commerce giant more than 460 physical stores.

Michelle Grant, head of retailing at Euromonitor International, recently said the deal between Amazon and Whole Foods makes sense but it’s not without its risks.

“Amazon has always wanted to become a big player in grocery,” Grant said. “However, there are challenges to selling groceries online, such as inconvenient and expensive delivery. It is also difficult to pick produce.”

Meanwhile, GlobalData Retail MD, Neil Saunders, said although Whole Foods remains profitable, the deterioration in its financial position gives it much less headroom for manoeuvre in terms of future investment and sharpening prices.

This story first appeared on sister site, Inside Retail Australia.

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