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The Winner In An Amazon-Whole Foods Deal? Blackhawk Network

AMZN, KR | June 28, 2017

Shares of Blackhawk Network Holdings Inc (NASDAQ: HAWK), a provider of prepaid payment networks, gained over 6 percent Wednesday after the company was named as a winner from Amazon.com, Inc. (NASDAQ: AMZN)'s proposed acquisition of Whole Foods Market, Inc. (NASDAQ: WFM).

Elaborating On The Blackhawk Connection, Winning Position

BMO Capital Markets' Paulo Ribeiro maintains an Outperform rating on Blackhawk's stock with a price target boosted from $40 to $50 as the company is a partner to both Amazon and Whole Foods.

Blackhawk's management team explained to Ribeiro in a meeting that it sees an opportunity to expand its relationship with Amazon in the international market in terms of distribution in Canada, the U.K., Germany and Asia. The company also cited its growing digital offering with Kroger Co (NYSE: KR) in which the traditional grocery chain can see how its gift cards are selling online and in physical stores, which offers a unique omni-channel view of gift card sales.

The company further noted that Whole Foods has a relatively weak digital offering that is far behind Kroger's, especially in terms of digital engagement and app use.

Blackhawk's management team also stated that it believes Amazon's tie-up with Whole Foods has little to do with closing retail stores. Rather, Amazon is looking to leverage its acquired real estate locations to distribute and sell more than just groceries. As such, the company doesn't see a scenario that will have a negative impact on foot traffic at grocery stores, which bodes well for its extensive presence in grocery store locations.

"Amazon's purchase of Whole Foods is viewed as a justification that physical retail, especially grocery, is going to be around for the long haul," Ribeiro wrote.

At time of publication, shares of Blackhawk were up 6.21 percent at $44.50.

Analyst: Kroger Should Outmuscle Amazon And Bid For Whole Foods