'Amazon Acquisition Event Risk' And The Food Service Industry

Analysts at Loop Capital Markets made use of a "prisoners' dilemma model" to gain a better understanding of what food-related stocks are at most risk from Amazon.com, Inc. AMZN's pending acquisition of Whole Foods Market, Inc. WFM.

Amazon's acquisition of a grocery store chain shows that the online e-commerce giant isn't interested in moving into the grocery space through a trial-and-error process over many years, Loop Capital's Andrew Wolf commented in a research report. As such, Amazon's profile in the food space is one of a "buyer rather than builder," which poses lots of risk to food companies that would be most exposed to any future acquisition.

Most At Risk

Food retailers are the most exposed given the sector's "significant fragmentation" and future Amazon acquisitions, Wolf continued. Next at risk is the foodservice distribution sector which is dominated by three large public firms. Of particular note, US Foods Holding Corp USFD would be a most likely target from Amazon since two private equity groups own a combined 36 percent of the entire company.

Convenience distribution ranks third at-risk, and some companies "might listen" to a potential Amazon takeover. Last, natural foods distribution is ranked as the least at-risk.

In terms of individual names, United Natural Foods, Inc. UNFI and Core-Mark Holding Company, Inc. CORE stand out as the least exposed to the potential event risk of Amazon buying one of their rivals.

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