It Started With A Whisper: SEC Filing Spills On How Amazon-Whole Foods Came To Be

The grocery sector nearly imploded last month on news that Amazon.com, Inc. AMZN would acquire Whole Foods Market, Inc. WFM.

While industry rivals brushed off the merger, assuring the Street of their competitive strategies and enduring worth, their wary shareholders took one look at the formidable foe of Amazon and lost faith, sending grocery retail shares plummeting.

Those who retained investments may have eyed the new pair enviously and begun asking, “How do I seduce an Amazon?” or “How can I get a Whole Foods?”

The seller’s latest proxy statement, published Friday by the Securities and Exchange Commission, disclosed exactly how such a deal transpires. And it’s more romantic than you’d think.

The Progression

Amid struggles and criticisms, Whole Foods management began evaluating its strategy and effecting restructuring in late 2016.

Jana Partners LLC entered the scene April 10, 2017, took an 8.8-percent stake in the company and began pressuring exploration of strategic alternatives.

A week later, Whole Foods received a letter of interest from an unnamed company regarding a possible partnership, but not a detailed transaction.

At the same time, CEO John Mackey and his executive vice president of operations were intrigued by a media report that Amazon might have once considered a Whole Foods acquisition. At their request, a company consultant facilitated an introduction between the companies for the expressed purpose of exploring a strategic transaction.

"Mutual friends set us up on a blind date," Mackey later told employees. "It was truly love at first sight."

On April 27, the parties entered into a non-disclosure agreement and opened dialogue on the transaction that ultimately played out in the disruptive June 16 announcement.

What Could Have Been

Throughout its assessment of options, Whole Foods fielded inquiries from two other companies and four private equity firms that never matured into actionable offers.

It's unclear what direction the firm would have taken without having stumbled on the pivotal news report, which is now the subject of speculation for industry analysts.

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