In a recent enlightening interview, John Mackey, the former CEO of Whole Foods, expressed regret over the company’s sale to Amazon in 2017. Mackey revealed that external pressures compelled him to make the deal, which he initially opposed.
Background of the Acquisition
Amazon’s acquisition of Whole Foods was valued at $13.7 billion, announced on June 16, 2017. The purchase price was set at $42 per share, a substantial 27% premium over Whole Foods’ last closing price.
At that time, Whole Foods faced significant challenges, including six consecutive quarters of declining sales and increasing competition from traditional grocery chains that were now offering organic products. With a reputation for high prices, the company struggled to maintain its market position.
Activist Investor Pressure
Mackey disclosed that activist investor group Jana Partners, led by Barry Rosenstein, pressured him into the sale. In April 2017, Jana Partners acquired an 8.8% stake in Whole Foods and immediately called for the company to explore a sale.
In a tense meeting, Mackey recalled how the group threatened to take over the board, dismiss him and other executives, and subsequently put the company up for sale to the highest bidder.
Searching for Alternatives
Faced with this ultimatum, Mackey explored various options, including fighting the activists and considering other potential buyers like Warren Buffett and Albertsons. However, these options didn’t align with his vision for Whole Foods.
Mackey had previously met with Amazon founder Jeff Bezos at a conference and found common interests. This connection led him to view Amazon as a viable solution to the pressures facing Whole Foods.
The Deal’s Impact
The acquisition closed on August 28, 2017. Following the announcement, Whole Foods experienced significant changes, including price reductions on popular grocery items and Amazon’s integration with Whole Foods’ point-of-sale systems.
Financial Outcomes
- Jana Partners reportedly made around $300 million in profit, selling their shares at an average price of $42.87.
- The acquisition diminished about $22 billion in market value from competing grocery stores in a single day.
- Customers benefited from four price cuts within two years after the sale.
Reflections from John Mackey
Despite his reservations about selling to Amazon, Mackey acknowledged it was the best solution to the problems facing the company at that time. He emphasized that Whole Foods’ situation was challenging and that the acquisition ultimately benefited customers, employees, suppliers, and shareholders alike.
Mackey retired in September 2022 after 44 years with Whole Foods and authored a memoir detailing his experiences through this period, including the Amazon acquisition.
