Walmart Might Fight Amazon for Whole Foods

Update 6/26: A source tells Reuters Walmart does not plan to make a bid for Whole Foods.

Walmart, once America’s largest retailer, could enter into a bidding war with Amazon, America’s current largest retailer, over Whole Foods, according to JP Morgan analysts who spoke with CNBC.

Amazon’s offer last week to purchase Whole Foods for $13.7 billion has sent markets and media into a tailspin. Since the offer was publicized, the organic grocer’s stock has risen so dramatically that Whole Foods is now worth more than Amazon’s offer. The Austin, Texas-based company founded by CEO John Mackey in 1980 is now trading at about a dollar more per share, or just above $43; Amazon offered to buy Whole Foods for $42 per share. At that point, eight days ago, Whole Foods was worth around $33 per share.

After Amazon announced its intention to buy Whole Foods, Walmart’s stock dropped about half a percent, or $4, earlier this week. Amazon is currently trading at more than $1,000 per share; Walmart’s stock price is hovering around $73 per share. Earlier this year, CNN reported Amazon was worth over $430 billion, just about twice as much as Walmart’s $220 billion. If Walmart does bid for Whole Foods, that would be good news for some investors, as Whole Foods stock may continue to rise. But Walmart is unlikely to win in any sort of bidding war against Amazon.

JPMorgan analysts Ken Goldman, Chris Horvers, and Doug Anmuth sent the note to CNBC, which read in part: "We do think there is a chance that Walmart makes a bid, [Walmart] stands out as the only company in our coverage with the means and motive to counterbid, but the motive is ultimately more driven by a defensive strategy."

The move seems out of place considering Walmart’s current customer base and target demographic compared to Whole Foods’ “Whole Paycheck” clientele. Though Walmart knows the grocery and distribution business, it may not maintain Whole Foods’ mission in the long term, and could weaken the brand. Whole Foods shoppers, who tend to be concerned with sustainability and want to know where their food comes from, would not be pleased if Walmart — known for pursuing profits over fair trade and mistreating employees — owned the grocery chain.

It’s unclear whether or not Amazon CEO Jeff Bezos would fully respect Whole Foods’ mission, but the online retail giant is in a better place to give Mackey’s company a wealth of resources in the form of capital, forward-thinking technology, and industry-leading delivery and distribution logistics.

Neither Amazon nor Whole Foods has confirmed JPMorgan’s note.

• Wal-Mart could enter a bidding war with Amazon over Whole Foods, JPMorgan says [CNBC]
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