Shares of Whole Foods closed Friday at $42.68 — topping the $42 per share offer that Amazon put in for the Austin, Texas-based grocery store chain.
Why would Wall Street push shares of Whole Foods higher than the offer price on the table?
Some speculated that the stock rose above $42 in anticipation that another buyer could emerge to challenge Amazon, potentially kicking off a bidding war for the 37-year-old grocery chain. The total value of Amazon’s offer stood at $13.7 billion, marking the largest acquisition offer in Amazon’s history.
Barclay’s analyst Karen Short today noted that another offer could be placed on the table for Whole Foods, prompting her to raise her stock price target for Whole Foods to $48 per share.
According to MarketWatch, Short said that competitors will work hard to “prevent the asset from landing in Amazon’s lap.” Barclay’s estimated that there is a 40 percent likelihood that another bidder would emerge.
Nat Burgess, managing partner at Seattle-based strategic advisory firm TechStrat, told GeekWire that there’s an 80 percent chance of a competing bid.
“Amazon placed their opening bid near the top of the range given by analysts, but for strategic reasons I think they will be chased higher by at least one other bidder,” Burgess noted. “The strategic reasons are that Amazon can put the other bidder out of business, and Whole Foods’ investment in delivery creates an instant offense against Amazon Fresh delivery.”
That raises the question: Who could outbid Amazon?
Walmart naturally comes to mind, and there’s certainly no love lost between the two retail titans. Kroger, the Ohio-based grocery chain, also could make a run at Whole Foods, though its stock was torched today, dropping nine percent after the Amazon-Whole Foods deal was announced. Kroger’s market value also stands at just $16.5 billion, so less than what Amazon is offering for Whole Foods.
Some also speculated that a European grocery conglomerate could come knocking on Whole Foods’ door, though Amazon’s growing power would make it a formidable competitor to take on.
If Whole Foods took another offer, it would have to pay a $400 million break-up fee to Amazon, according to CNBC.
“The two or three that could bankroll a competing bid are probably sitting with their bankers now, looking at antitrust options and assembling competing bids,” Burgess said. “Barclays put an upside value on Whole Foods of $57, which has probably encouraged investors to bet on at least one more raise of the paddle.”
Amazon’s stock closed Friday at $987.71, up 2.44 percent. Its market value now stands at $466 billion, making it one of the most powerful companies in the world.
Shares of Whole Foods rose 29 percent today after Amazon announced its takeover.