SEATTLE –– Amazon.com said Friday that it would buy Whole Foods Market for $13.7 billion, its biggest acquisition ever and a huge move into the grocery business it's been trying to crack for a decade.
The deal, expected to close in the second half of this year, gives Amazon –– which has been experimenting with various physical store concepts to make establish itself as a food purveyor — an instant expanse of 460 high-end stores across the U.S., in Canada and in the U.K.
Amazon agreed to pay $42 per share for the Austin, Texas-based grocer in an all-cash transaction, a 27 percent premium over Thursday's closing stock price. The transaction, will be financed with debt, according to securities filings. The break-up fee was set at $400 million.
Amazon shares rose 23.5 percent Friday after the deal was announced. Shares of Whole Foods rose 29 percent, to $42.68, above Amazon's offered price.
Shares of competitors Wal-Mart, Kroger and Costco Wholesale fell on the news.
The acquisition, expected to close this year, is more than 10 times larger than what Amazon spent on its next-biggest deal, the purchase of online shoe retailer Zappos in 2009.
Whole Foods, which made its name retailing organic and fresh products, had been struggling recently with stepped-up competition from Costco Wholesale, Trader Joe's and other grocers.
But in the hands of Amazon it would be a potent weapon against archrival Wal-Mart, the world's largest retailer, which dominates the grocery world and has been stepping up its e-commerce.
On Friday, Wal-Mart said it would buy Bonobos, a popular internet apparel retailer; last year, it acquired Amazon competitor Jet.com and appointed that company's chief executive, Marc Lore, to strengthen its e-commerce operation.
For now, the Amazon-Whole Foods deal seems unlikely to change much. Whole Foods will keep its brand and John Mackey, its current CEO, will remain in place. The acquisition would add Whole Foods' 87,000 employees to Amazon's payroll, which as of the end of the first quarter had 351,000 people.
Opposition to the deal came from organized labor, among other critics.
Marc Perrone, head of the United Food and Commercial Workers International Union, which represents millions of grocery workers, said that Amazon's "brutal vision for retail is one where automation replaces good jobs. That is the reality today at Amazon, and it will no doubt become the reality at Whole Foods."
Stacy Mitchell, co-director of the Institute for Local Self-Reliance, a non-profit that advocates for the development of local communities, called for antitrust regulators to block the deal, which she said "would dramatically amplify Amazon's online market power."
The grocery market, a $750 billion sector in the U.S., is one of the few provinces in the retail world that Amazon hasn't managed to radically alter.
That's in part because most shoppers prefer buying groceries, and especially fresh foods, in person. The logistics of moving fresh food are also complex.
Amazon launched Amazon Fresh in 2007, a service that for a fee delivers groceries to customers' homes but that has failed to make a wide impact.
More recently the company has deployed various physical retail concepts, some with the aim of making people comfortable with the concept of buying food from Amazon and eventually nudging them to move a big part of their grocery shopping online. Seattle has been the center of that experimentation.