Amazon.com, Inc. (NASDAQ: AMZN)'s $13.7 billion
acquisition
of organic grocer chain Whole Foods Market, Inc. (NASDAQ: WFM), if approved, has the potential to drastically change the dynamics of not only
Amazon's business but the entire grocery sector.
Within a few hours of the deal announcement, some of Wall Street's biggest analysts are already out with their initial
thoughts.
SunTrust: Counter Bid Is Possible
SunTrust Robinson Humphrey's David Magee commented in a brief
research report that Amazon's
offer implies a an EV/EBITDA multiple of around 10.5x. This multiple is only slightly higher to an average take-out multiple of
9.9x in the retail sector dating back 11 years.
As such, it wouldn't come as a "shock" to the analyst if a counter bid by a large grocery chain would be presented.
Meanwhile, Amazon has been slowly entering the grocery space through various trials and initiatives but a full-scale acquisition
of an established grocery chain like Whole Foods allows the online commerce to
"quickly skate to where the puck is headed."
Also, it wouldn't come as a surprise if Sprouts Farmers Market Inc (NASDAQ: SFM) would be a potential acquisition target, Magee added.
Oppenheimer Also Sees Potential Bidding War
Analysts at Oppenheimer also considers a $42 acquisition price target as undervaluing Whole Foods' prospects and strong
brands.
In a brief report the analysts emphasized that they had modeled a take-out of Whole Foods to occur in the mid-$40s range, so "it
appears there is some money being left on the table." As such, another bid at this point shouldn't be ruled out and could come from
a "defensive measure to protect against the Amazon threat."
Moves In The Space
At time of publication:
- Amazon was up 3.01 percent at $993.20.
- Grocer peer Kroger Co (NYSE: KR) was down
12.55 percent at $21.47.
- Sprouts was down 6.76 percent at $20.90.
- Grocer peer Village Super Market, Inc. (NASDAQ: VLGEA) was down 3.99 percent at $24.04.
- Grocer peer Weis Markets, Inc. (NYSE: WMK) was down 5.3 percent at $48.22.
- Whole Foods was up 27.07 percent at $42.01.
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