Whole Foods shares keep rising in bidding war speculation


Reuters

UPDATE 2-Whole Foods shares keep rising in bidding war speculation


(Adds comments by investor, antitrust expert, updates share
prices to close)
    By Sinead Carew and David RandallJune 19 (Reuters) - Whole Foods Market Inc <WFM.O> shares
added to their gains on Monday after Amazon.com Inc <AMZN.O>
announced plans last week to buy the upscale grocer, with
investors betting that rivals could step in to create a bidding
war.
    Amazon shares also rose as Wall Street analysts lauded the
proposed $42-per-share deal and bet that the company would
prevail in any bidding battle. [nL3N1JD3Z4]
    Whole Foods shares rose 1.3 percent on Monday to close at
$43.22 - adding to Friday's 29 percent rise and reflecting hopes
the company might fetch a higher price. Amazon shares ended up
0.8 percent at $995.17.
    "We thought Amazon was thrifty in its offer," said Charles
Kantor, managing director at Neuberger Berman Investment
Advisers LLC, which owns around 2.7 percent of Whole Foods
shares and had pressured the company to take steps to improve
its stock price.
    Kantor noted that Amazon's market cap gain roughly equaled
the amount the company is paying for Whole Foods.
    "I think there's the argument that Amazon acquired Whole
Foods for free," he said. "The reaction of shareholders suggests
that Amazon has left themselves lots of room to pay more for
this strategic asset."
    Some investors suspected other companies were weighing a
rival bid.
    "Every grocery store out there now is having a conversation
about how much they can afford to spend to keep Amazon out of
the space," said Brian Culpepper, a portfolio manager at James
Advantage funds.
    Culpepper, who owns Kroger Co <KR.N> shares, said Kroger is
the company that would be most likely improve Whole Foods'
efficiency, but that it would have difficulty matching Amazon's
cash offer.
    Kroger shares climbed 1.6 percent to close at $22.64 on
Monday.
    "Kroger would have to pay in stock, and their stock has been
hurting," giving them less leverage to get into a protracted
bidding war with Amazon, Culpepper said.
    Barclays analyst Karen Short raised her Whole Foods price
target to $48 from $38 and upgraded the stock to overweight from
equal-weight, citing the possibility of counterbids.
    "Many will do anything to either make this acquisition more
costly for Amazon, or prevent the asset from landing in Amazon's
lap," Short wrote in a note to clients.
    A $48-a-share price tag would be more than reasonable for a
fellow retailer that could eliminate overhead at Whole Foods,
Short said, while adding that very few companies could outbid
Amazon.
    Amazon's offer of $13.7 billion, representing a multiple of
10 times earnings before interest, tax, depreciation and
amortization, could possibly be raised to 11 or 12 times,
according to Kevin Dreyer, co-chief investment officer at
Gabelli Funds, which holds Whole Foods shares.
    "Fourteen billion is a big number but it's not a number
where there's no other buyer," said Dreyer. "Others could
certainly look at this and sharpen their pencils."
    Wal-Mart Stores Inc <WMT.N> could have sufficiently deep
pockets to make a counter bid and other grocery rivals such as
Kroger or Albertsons Cos Inc <ABS.N> would have the motivation,
he said.
    Any of the big grocery chains that bid on Whole Foods would
likely win antitrust approval to buy the premium grocery chain,
according to three antitrust experts.
    Any buyer of Whole Foods would likely argue that it was not
in the same market, said Alden Abbott, an antitrust expert with
the Heritage Foundation.
    "Even if they did compete ... you'd have to look at the
presence of (other grocery chains)," said Abbott, who argued
that many Whole Foods stores are in close proximity to other
grocery stores, which means antitrust enforcers might be
satisfied there was adequate competition.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Reuters Insider-Breakingviews TV: Bidding against Amazon?     http://reut.rs/2sHLC5u
BREAKINGVIEWS-Amazon's one-click deal keeps Wal-Mart at bay
[nL1N1JG0FK]
Reuters Insider-How Amazon-Whole Foods deal changes retail:
Barron's Buzz    http://reut.rs/2twqA6U
TAKE A LOOK-Amazon to acquire Whole Foods in $13.7 billion deal
  [nL1N1JD16Q]
Reuters Insider-Amazon to clash with Wal-Mart    http://reut.rs/2sIsuVc
BREAKINGVIEWS-Blue Apron's $3.2 bln debut could be its best dish
   [nL1N1JG0I1]
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Additional reporting by Michael Flaherty and Lewis Krauskopf
in New York and Diane Bartz in Washington; Editing by Lisa Von
Ahn and Matthew Lewis)
 ((sinead.carew@thomsonreuters.com)(+ 1 646 223 6186)(Reuters
Messaging: sinead.carew.thomsonreuters.com@reuters.net))

Keywords: WHOLE FOODS M&A/AMAZON.COM (UPDATE 2, PIX)



This article appears in: World Markets , Stocks , Technology
Referenced Symbols: ABS , AMZN , KR , WFM , WMT


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