While Whole Foods Market CEO John Mackey told employees that “love at first sight” led to its merger with Amazon.com, Whole Foods had other suitors in a whirlwind of activity before a deal was agreed to last month, according to Supermarket News.
Whole Foods detailed the events leading to the proposed merger in a filing with the Securities and Exchange Commission last week — a tumultuous three-month period during which Whole Foods tried to appease activist investors demanding changes to its board of directors; juggled inquiries from at least one strategic competitor, one would-be supplier and four private-equity backed suitors willing to explore a leveraged buyout. Whole Foods is reported to have reached out to Amazon on a hunch. This, while reformulating its board and crafting a long-term business plan to address ongoing challenges regarding sales, costs and ultimately, its stock price.
The filing also detailed the swiftness with which the Amazon deal ultimately came together, noting the Seattle e-commerce giant was not interested in participating in a drawn-out, multi-party auction, was prepared to walk away in the event of a leak, and grudgingly upped its offer to buy Whole Foods only once insisting that was its best and final offer.
Representatives of Whole Foods and Amazon met for the first time on April 30, Amazon provided a written offer of $41 per share on May 21, and upped the offer to $42 per share June 1. That was ultimately the price agreed to when the companies announced the merger on June 16.
During this period, Whole Foods received a preliminary offer of $35 to $40 per share from what it identified in the filing as an “industry participant” referred to as “Company X.” Representatives of that company in a May 18 meeting with CEO Mackey and Whole Foods chair Gabrielle Sulzberger presented a preliminary offer as a “merger of equals” that would be paid for in a combination of debt and equity. While Mackey met with Company X, David Cannon, executive vice president of operations spoke by phone with “Company “Y” and industry participants that sought “a commercial relationship, such as a supply agreement” with Whole Foods, the filing said. Company Y however was not interested in acquiring the company.
Whole Foods had been formulating plans to transform the company. The company had abandoned its co-CEO structure late last year and was discussing “rapidly evolving industry dynamics, intensifying competitive conditions, deflationary price pressures and technological changes relevant to the company’s business and its long-term prospects” when activist Jana Partners revealed April 10 that it had acquired nearly 9 percent of Whole Foods stock and intended to engage in active discussions with the company’s board of directors and management regarding items highlighted in its filing. That event triggered some solicitations. Company X reached out within a week, but the Amazon talks took a further nudge.
Amazon’s first offer to acquire Whole Foods for $41 per share, came three weeks later. Whole Foods countered at $45. Goldman Sachs, representing Amazon in the deal, then upped its offer to $42 per share “but stressed several times that this was Amazon.com’s best and final offer,” and requested a quick “yes or no” response. Whole Foods’ board ultimately agreed to those terms and did not solicit proposals from the private equity firms.
