In order to finance the $13.7 billion acquisition of Whole Foods Market (WFM) announced in June, e-commerce giant Amazon has now issued bonds $16 billion. The offering will be broken into seven parts ranging from three-year notes to 40-year notes. It is the fourth-largest high-grade debt offering this year
Moodys has assigned on Monday a Baa1 rating to the unsecured bonds and changed Amazon’s business outlook from stable to positive. "The change in outlook to positive reflects our view that despite the increase in debt, the Whole Foods acquisition is an immediate credit positive for the company on a variety of fronts," said Moody's Vice President Charlie O'Shea in a statement.
WFM is an American supermarket chain exclusively featuring foods without artificial preservatives, colors, flavors, sweeteners, and hydrogenated fats . The acquisition will widely expand Amazon's presence as a physical retailer and will help to give the company a base to ship grocery via its Amazon Fresh online grocery delivery service all across the US. Amazon Fresh is currently only available in some U.S. states, London, Tokyo, and Berlin. The service also delivers beer and other beverages. In June, Amazon introduced a dash button to order Heineken beer with one press, which was heavily criticized by anti-alcohol activists (inside.beer, 24.6.2017).
In February, Amazon also tested the sale of alcohol in its Amazon Go stores (inside.beer, 22.2.2017)
People familiar with the business believe that Amazon will lower the traditionally sky-high WFM prices for Amazon Prime customers to ensure market share gains for WFM while simultaneously growing the Amazon Prime member pool. This will put additional pressure on traditional retailers and those, who are keen to enter the booming online grocery market.
One should remember that Amazon started just the same way in the online book-store and has since then turned this business upside down. It is most likely that Amazon wants to use the WFM platform now to do the same in the online grocery business.
The purchase of WFM is Amazon's largest acquisition in its history and is expected to close by the end of the year. The huge purchase price could have been paid directly by Amazon, which already has already $21 billion in cash and other short-term investments in its coffers. But Amazon takes advantage of low interest rates and wants to be flexible for other opportunities to come.
Jeff Bezos, founder and CEO of Amazon became the richest person in the world for the first time with a $90.6 billion net worth, when Amazon stock climbed to an intraday high of $1,083.31 on July 27, 2017. In the meantime, the stock has lost again and placed Bezos only second on the list of the richest people in the world.