Sure, Amazon is paying a pretty penny for Whole Foods, but that wasn’t always the plan. In fact, recently filed documents show that before the e-commerce giant laid down $13.7 billion for the specialty grocery chai, it made at least one lower bid.
Amazon’s first go at buying Whole Food actually came nearly a month before the current deal, when the online retailer issued a written proposal May 24 offering $41 per share.
According to a proxy statement — starting on page 23 — filed by Whole Foods with the Securities and Exchange Commission, Amazon described its initial proposal as a “strategic investment” and a “compelling” value for shareholders.
Amazon also made it clear that it was only interested in acquiring Whole Foods if the talks remained confidential, noting in a letter from its lawyers on May 25 that the company was “very sensitive with respect to confidentiality, not willing to engage in a multiparty sale process, and had submitted what they believed to be a very strong proposal.”
When Whole Foods’ board finally met on May 30, they discussed the company’s long-term outlook, associated business plans, ongoing talks with Amazon, and overtures made by third parties, including two unnamed companies and four private equity groups.
The proxy statement notes that Whole Foods previously met with the members of at least one of the unnamed companies, which set the potential value of the grocery chain between $35 and $40 per share.
During the board’s meeting it was decided not to solicit proposals from the private equity firms, given concerns related to leaks and that the equity firm bids would be lower than Amazon’s offer.
“The Whole Foods Market board of directors concluded that entering into the merger agreement with Amazon.com was more favorable to Whole Foods Market shareholders than the other alternatives reasonably available to Whole Foods Market, including the continued operation of Whole Foods Market on a standalone basis and the pursuit of other potential actionable strategic or financial transactions,” the filing states.
Still, while Amazon’s offer came at a time when Whole Foods’ board was actively assessing the “rapidly evolving industry dynamics, intensifying conditions… and its long-term prospects,” including pressure from shareholders to explore a sale, the board of directors determined the first proposal was not sufficient.
Instead, Whole Foods’ board “decided that making a counter proposal at a higher price was the most effective response.” And so, Whole Foods countered Amazon’ offer with a $45/share proposal.
Reps for Goldman Sachs, Amazon’s financial advisor in the deal, “expressed their disappointment at the price,” according to the filing, noting that Amazon believed it had made a strong bid.
The following day, Goldman Sachs told Whole Foods’ financial advisor Evercore that Amazon was considering “other opportunities instead of acquiring the company.”
However, in the end, the reps said that “as a last stretch” Amazon was willing to offer $42/share, “but stressed several times that this was Amazon’s best and final offer.”
That same day, Whole Foods’ board agreed to the deal, finding that it was “fair” and “in the best interests of, [Whole Foods] and its shareholders.”
After at least two weeks of investigations and discussions, Amazon and Whole Foods announced their intention to marry on June 16.
“This partnership presents an opportunity to maximize value for Whole Foods Market’s shareholders while at the same time extending our mission and bringing the highest quality, experience, convenience and innovation to our customers,” Whole Foods CEO John Mackey said at the time.
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