FTC Approves Whole Foods-Amazon Merger -- 2nd Update

By Brent Kendall and Heather Haddon Features Dow Jones Newswires

Amazon.com Inc.'s takeover of Whole Foods Market Inc. cleared its biggest hurdle on Wednesday as federal regulators approved the e-commerce giant's big bet on the more than $700 billion food retail market.

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The Federal Trade Commission's decision allows the companies to complete their $13.7 billion deal, including debt, and avoid a prolonged antitrust investigation.

Whole Food shareholders also cleared the deal Wednesday, the Austin, Texas-based company said. Amazon shareholders don't need to sign off on the transaction.

The FTC had been conducting an initial review of the deal to see if it might raise any concerns about competition. The commission had the option of examining the transaction in more depth -- a move that have been called for by some Democratic lawmakers, labor and consumer groups -- but the FTC instead decided that further scrutiny wasn't warranted.

"Based on our investigation we have decided not to pursue this matter further," said Bruce Hoffman, the acting director of the FTC's bureau of competition.

Amazon and Whole Foods gave the FTC additional time for a preliminary government antitrust review, a bid that proved successful in heading off a potentially longer government investigation.

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Both Amazon and Whole Foods said that they have taken multiple steps to complete the deal and that everything is on path.

A combined Amazon-Whole Foods would have only a small share of the grocery market, making the deal different from the type of mergers that raise red flags when two major competitors seek to join forces.

Whole Foods operates 469 stores and does roughly $16 billion in sales annually, compared with around 25,000 full-service supermarkets in the U.S. generating $440 billion in revenue last year.

Amazon and Whole Foods executives have said that the companies will complement each other. People familiar with Amazon's thinking say the company is likely to lower prices and eventually add additional customer services, such as online grocery pickup.

Some critics, however, expressed concerns that the deal would allow an already formidable Amazon to become more powerful, potentially to the detriment of consumers and the grocery industry.

John Simpson of Consumer Watchdog, a nonprofit that spoke with the FTC about their concerns over the deal, said the group will seek to explore potential challenges on the state level, including by filing complaints with state attorneys general.

"I think it's completely wrongheaded," Mr. Simpson said about the FTC's decision.

The United Food and Commercial Workers International Union, a national labor group that opposed the deal, said it hoped Amazon would protect jobs rather than pushing automation.

Amazon and Whole Foods both want to close the deal by the end of the year. Whole Foods had seen its stock lose more than half of its value as its sales have slumped in the past two years, with mainstream supermarkets starting to sell similar natural and organic goods offerings at lower prices.

The slump prompted activist investors this year to push for board and operational changes at Whole Foods. That pressure drove Whole Food executives to agree to a deal with Amazon, which is seeking to expand its reach into food retail.

The deal is the biggest U.S. retail merger so far this year, and would be the third largest since 1995, according to Dealogic.

Shareholder proxy services Institutional Shareholder Services Inc. and Glass, Lewis & Co. endorsed the merger despite some concerns over a lack of a full sales process. Glass Lewis said increasing competition in the grocery sector and questions surrounding Whole Foods's ability to improve its operations makes the deal beneficial to investors.

Shareholders also approved proposals to decrease the number of publicly traded Whole Foods shares by half, and to allow payouts to company executives under the deal.

ISS expressed reservations about the cash and stock payouts, which amount to $20 million to six officers if they are replaced. But the proxy service recommended shareholders vote for it, given the payouts represent a fraction of the stock value gains under a merger.

Laura Stevens contributed to this article.

Write to Brent Kendall at brent.kendall@wsj.com and Heather Haddon at heather.haddon@wsj.com

(END) Dow Jones Newswires

August 23, 2017 18:41 ET (22:41 GMT)