Amazon Sells Debt To Pay For Whole Foods

By Grant Arnott | 16 Aug 2017

Amazon is selling debt to pay for its US $13.7 billion deal to acquire Whole Foods Market, in order to power Jeff Bezos’s plans to triumph in the supermarket retail sector.

Amazon is selling US $16 billion worth of unsecured bonds in seven parts (ranging from three-year notes to40-year notes), which will go towards funding its acquisition of organic grocer Whole Foods Market, a deal which is expected to be complete by the end of the year.

Amazon has not commented on how much money it plans to raise when it sells the senior unsecured notes, but on Tuesday, credit ratings agency Moody’s confirmed the company is raising up to $16 billion.

In June this year, the Seattle-based retailer made the big announcement to takeover Whole Foods Market, an acquisition that sees it gain more than 460 physical stores, a vital area the company has been trying to develop.

“Whole Foods provides Amazon with greater scale and a crucial brick-and-mortar presence in a segment where it has been trying to grow,” said Moody’s analyst Charlie O’Shea in a report.

It is believed that Amazon will reduce prices at the struggling high-end supermarket chain, in its efforts to increase its market share of middle-income consumers, which could intensify a price war in an industry which already has thin margins.

“The expansion plan Amazon has gotten on with buying Whole Foods is just the beginning, not the end,” according to Bloomberg Intelligence analyst Jitendra Waral.

Amazon’s debt sale marks the company’s first bond sale since 2014, which has earned the e-commerce powerhouse a higher analyst rating from CreditSights, which currently rates the debt as outperform, from underperform.

“We are comfortable buying Amazon’s bonds across the entire curve given its strong operating trends and competitive position in both its e-commerce and cloud computing businesses,” said CreditSights analysts led by Jordan Chalfi, in a report.

The acquisition of Whole Foods marks world’s largest online retailer’s, largest every deal in its history.

 

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