Whole Foods Insights and Opportunities; Will John Mackey Sell
AUSTIN, TX - As the rumor mill continues to turn with regard to a Whole Foods' potential buyer, skeptics are wondering if Co-Founder John Mackey will even entertain prospective suitors as he looks to protect the artisan, organic legacy he has built for Whole Foods.
As we previously reported, word on the street in recent months suggests that Kroger is one buyer eyeing the company. Maybe they have already tried and failed? Maybe not.
With that in mind, we reached out to sources close to ANUK to ask the question: Will Whole Foods sell?
To begin responding to the question, Whole Foods has begun actively consolidating shippers, and minimizing its local sourcing program, as industry friends recently shared with us; a move that makes Whole Foods more attractive to potential buyers like Kroger. Some see the match-up as too fractured of a fit to work well in the long-haul. So, what does this mean?
Marriage Made in Heaven? Or Not?
In a nutshell, it only makes sense for certain national chains to acquire a more artisan-driven retailer, like Whole Foods. The philosophies must align.
Mackey may be looking for a company that shares in the same model and vision that he built. Whole Foods demands a different focus than most national retailers, we are told, and you have to appreciate the cost Whole Foods is willing to incur to keep its mission alive.
Others echo this sentiment as well, noting that Whole Foods is in the business of raising awareness, promoting planet generosity, and paying it forward. Other companies have different perspectives and are in the business of retail more than social consciousness–where Mackey grounds his vision for Whole Foods.
In addition, some sources shared with us that some prospective suitors are too aggressive, and Mackey’s end-game is essentially to protect his legacy and founding principles. Yet others argue that some large national chains have successfully purchased other banners, over the years, and have managed to keep their differentiating attributes within their respective markets and/or channels, while at the same time benefiting from their system and economies of scale.
Another interesting thought to come to the table from some of our industry friends is that Amazon would not be a too far-fetched candidate for Whole Foods. A company like Amazon can embrace what Whole Foods has done with its mission and values, potentially more so than other retailers who are profit-driven. So many large scale retailers are trying to find ways to increase profits by driving prices down and decreasing service levels, and Amazon could surface as an option simply because it is different from the pack.
If Whole Foods wants to talk legacy, then it may be beneficial for them to have that conversation with a less traditional retail corporation, sources add. Amazon wants to expand its footprint in grocery, the company is progressive, tech-driven, and has the kind of money to invest in a move like this.
En Garde – Poison Pill
While some people think that a Kroger acquisition of Whole Foods is imminent, others are saying that Mackey could use a poison pill in his back pocket if pushed by a large national train that does not share the same values. Now that he has full control of the company with the elimination of its current leadership structure, and with whispers of a mass exodus from the company ensuing, the future looks more uncertain than ever.
So, what is a poison pill? It is a mechanism used by public companies to prevent hostile takeovers. A company targeted for a takeover utilizes the poison pill strategy to make shares of the company’s stock look unattractive or less desirable to the acquiring firm.
According to Investopedia, there are two types of poison pills:
- A “flip-in” permits shareholders, except for the acquirer, to purchase additional shares at a discount. This provides investors with instantaneous profits. Using this type of poison pill also dilutes shares held by the acquiring company, making the takeover attempt more expensive and more difficult.
- A “flip-over” enables stockholders to purchase the acquirer’s shares after the merger at a discounted rate. For example, a shareholder may gain the right to buy the stock of its acquirer, in subsequent mergers, at a two-for-one rate.
While it is obvious to many players that Whole Foods is being prepped for sale, it might be some time before this all shakes out.
So, what’s next as the Whole Foods’ rumor mill plays out? We will keep you posted here at AndNowUKnow.