Amazon buying Whole Foods for $13.7 billion

Amazon is buying Whole Foods for $13.7 billion, the companies said Friday. 

The deal values the grocer at $42 a share.

Whole Foods (WFM) had been under pressure from investor Jana Partners, a hedge fund that lobbied for the high-end grocer to seek a buyer to reverse declining share price. Shares had been trading at about $33 Thursday; trading was halted Friday morning on the news.

The deal is expected to finish later this year, if Amazon's shareholders approve it. It would make the combined company the seventh-largest food retailer in the U.S., according to Greg Wank, partner-in-charge of the food and beverage practice of accounting firm Anchin." This makes them a major player in grocery and just adds more pressure on Wal-Mart, Target and Costco to not continue to lose share," he told CBS MoneyWatch. 

Amazon's own stock rose by 3 percent Friday morning.

But the deal also has potential to attract scrutiny from regulators over whether it gives Amazon, which is already dominant in the retail space, too much leverage. Rep. Ro Khanna, a Democrat representing California in the House of Representatives, called for a review of the deal from the Department of Justice and Federal Trade Commission.

The merger opens up tantalizing possibilities for shoppers, as several people noted online.

Amazon (AMZN) has been dabbling in the grocery business with Amazon Fresh, a delivery service available in about 20 cities for a $14.99 monthly subscription. But the online retailer has been challenged by logistical issues and shoppers' reluctance to buy food sight unseen, Bloomberg reported.

Whole Foods stores will keep operating under the company's brand, according to the release. 

"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 in a release.

Grocery stocks plunged on news of the mega-merger Friday morning. Kroger (KR) fell 14 percent, while Target (TGT) dropped 12 percent and United Natural Foods (UNFI) fell 20 percent. 

An Amazon spokesperson promised no layoffs would result from the merger, according to a reporter.

But others on Twitter criticized the potential effect on workers from the melding of two large employers who are known to be unfriendly to unions.

Jonathan Berr contributed reporting. 

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