What you need to know as Whole Foods shareholders get set to vote on Amazon deal

Posted August 21st, 2017

It’s an interesting time to be a Whole Foods Market shareholder.

While months ago the company was struggling to find a direction for its future, shareholders are now set to vote Wednesday on a $13.7 billion deal that would give Amazon.com ownership of the Austin-based grocer. 

The shareholders vote will be held at the company's headquarters on Bowie Street in Austin. Both Amazon and Whole Foods have said they expect se the deal to close before the end of the year.

At $42 per share, the buyout price is 27 percent above what Whole Foods shares were trading at when the deal was announced. 

Market analysts say they expect the deal will easily win shareholder approval, though a handful of investors have filed lawsuits opposing the buyout. 

Many in the business and technology world are keeping a close eye on the deal and what it could mean for the future of the retail grocery industry. Analysts have said Amazon could look at lowering prices at Whole Foods while integrating its Echo home devices and other products, but much uncertainty remains over what Amazon will do with the more than 450 Whole Foods stores and its 87,000 employees. 

Related: Whole Foods executives set to make millions after deal with Amazon closes 

The companies announced the deal on June 16 after two months of talks

Before the agreement, Whole Foods had faced pressure to change from some of its biggest shareholders, including investment firm Jana Partners, which owned more than 8 percent of the company but sold its entire stake after deal was announced.

Whole Foods has struggled to adapt to increased competition from big box stores, other grocery chains and online retail. The grocer has had eight straight fiscal quarters of falling same-store sales and also seen a dip in profits

After replacing half of its board of directors this year and hiring a new chief financial officer, the company reached out to Amazon in April after representatives saw reports that the e-commerce giant had been looking at buying the grocer a year earlier. 

Whole Foods shares were trading at $33.06 per share the day before the deal was announced.They have been trading at between $41 and $42 per share since, though shareholders are guaranteed $42 per share if the deal closes.

At least three shareholders have sued Whole Foods since the deal was announced, claiming that the arrangement with Amazon lacks transparency and undervalues Whole Foods. 

One of those shareholders, Elizabeth Gieske, who filed the suit from Houston, took issued with Whole Foods’ proxy statement filed July 7 with the U.S. Securities and Exchange Commission. Her lawsuit claims that the document -- which lays out the terms of the agreement -- fails to show how the company calculated certain financial projections in regards to the deal.

The lawsuit also claims the proxy statement fails to “disclose the timing and nature of all communications regarding defendant (Whole Foods CEO John) Mackey’s future employment, as well as communications involving future employment and/or directorship of any other Whole Foods executives and directors, including who participated in all such communications.”

Other shareholders have also claimed that potential rival buyers don’t have a fair chance at bidding for the company because Whole Foods agreed with Amazon on terms such as Whole Foods having to advise Amazon of any proposals received by other companies. 

U.S. lawmakers such as U.S. Rep. David Cicilline, D-Rhode Island, have questioned the potential impact of the deal on consumers and brought up worries of Amazon creating a monopoly on the grocery business. Industry analysts say that will not be an issue because combined, both companies reportedly share less than 2 percent of the grocery market. The Federal Trade Commission will also have to approve the deal before it can close.

Amazon announced  that it will sell $16 billion worth of bonds to finance most or all of its buyout of Whole Foods. It’s the first time since 2014 that the $472 billion company has sold bonds.