Slashdot Mirror

← Back to Stories (view on slashdot.org)

Amazon Is Seeking $16 Billion Bond Sale For Whole Foods (bloomberg.com)

Posted by BeauHD on from the supermarket-business dept.

An anonymous reader quotes a report from Bloomberg: Amazon is turning to the debt markets to fund the $13.7 billion acquisition of Whole Foods and power Jeff Bezos's planned conquest of the supermarket business. The world's largest online retailer is selling $16 billion of unsecured bonds in as many as seven parts, according to a person with knowledge of the matter. In a sign of market interest, the longest portion of the offering, a 40-year security may yield 1.45 percentage points above Treasuries, down from initial talk of 1.6 percentage points to 1.65 percentage points, said the person, who asked not to be identified as the deal is private. The sale marks the first bond-market foray since 2014 for Amazon and will support the purchase of the organic-food chain, according to a company statement. The partnership, which rattled the grocery world when announced in June, is expected to reduce prices at Whole Foods, an iconic yet struggling high-end grocery trying to lure more low- and middle-income shoppers. The deal could intensify a price war in an industry beset by razor-thin margins and persistent deflation.

9 of 46 comments (clear)

  1. Unsecured bonds by Anonymous Coward · · Score: 3, Insightful

    AKA "free money from suckers"

  2. Call me crazy by 93+Escort+Wagon · · Score: 3, Interesting

    I've bought a lot of stuff from amazon.com. But, during the past few months, I've started thinking about whether I should intentionally start patronizing other businesses - both online and offline - when I want to shop for things I would normally buy from Amazon.

    Thing is, it's hard to beat the convenience - and it seems like the companies which can more or less match that level of convenience are also humongous companies in their own right.

    --
    #DeleteChrome
    1. Re:Call me crazy by Anonymous Coward · · Score: 3, Interesting

      Hi,

      I used to have Amazon Prime and order from there regularly. No complaints but I cancelled just for the f* of it. Why be tied to one retailer? Plus I don't believe Amazon is the cheapest nor the best. That would be BHPhotoVideo, if they have what I'm looking for.

      My main stores, in order, are:
      1- BHPhotoVideo
      2- Walk-in stores: Target, Frys, Walmart
      3- Amazon
      4- Walmart.com

      For not having prime, Amazon seems to "punish" me by adding extra shipping delays. But that only makes me appreciate the other stores, which don't do that, even more.

      I like Amazon. I just don't think it's that exceptional anymore.

    2. Re:Call me crazy by Presence+Eternal · · Score: 3, Interesting

      Amazon torques me off from time to time, but as of right now they're simply too good for me to go anywhere else. The store card is 5% back on all purchases, and they tend to already have the best price, or a good price factoring in not having to go for a drive in a rural area where the grocery store is 20 minutes away. On top of that no rush shipping bonus is usually good towards ebooks that I'd be paying for anyway, so that's like an extra buck off almost every purchase. Even ebay sellers rarely compete well vs Amazon except for ultra cheap stuff straight from Hong Kong. Their only real failure is they are incompetent at vetting reviews, and that forces me to vet every single product on fakespot.com.

  3. So let me get this straight... by cheesybagel · · Score: 2

    A 40-year bond from a private company which might not last even half that long with a yield that is 1.45% larger than historically low rate government bonds. Riiiight....

    1. Re:So let me get this straight... by ClickOnThis · · Score: 2

      A 40-year bond from a private company which might not last even half that long with a yield that is 1.45% larger than historically low rate government bonds. Riiiight....

      The duration of a bond may not reflect its actual lifetime. If the bond is callable, then the issuer has the right to buy it back under conditions specified in the bond issue.

      Many people have 30-year mortgages on their house, but refinance into other mortgages well before 30 years go by.

      --
      If it weren't for deadlines, nothing would be late.
    2. Re:So let me get this straight... by ClickOnThis · · Score: 2

      I'm not sure I understand your question. Amazon wants to borrow at a low rate. And if rates are going up, then locking them in is a good thing. If rates go even lower, then they can call the bonds back and re-issue new ones at lower rates. Granted, the bonds may rise in value if rates drop, but if the math works out for them, they can do it.

      --
      If it weren't for deadlines, nothing would be late.
  4. Re:Well this is odd by Fly+Swatter · · Score: 3, Insightful

    So why is Amazon going with this route?

    Between this and Tesla's junk bond story not long ago, i'm thinking there are some junk bond shenanigans currently going on in the banking industry that makes things like this lucrative for the seller.

  5. Re:Well this is odd by ClickOnThis · · Score: 2

    16 billion is one big whack of cash. I doubt that a single bank would be willing or able to take on that kind of risk out of their own capital.

    So, Amazon goes to the bond market, which is much larger than any bank, or even the entire US stock market (in fact it is twice the size of the stock market in capitalization.)

    As for not issuing Amazon stock to the current Whole Foods stock-holders, perhaps they fear a dilution, or don't want to influence governance as a result of all those new voting shares. There is an interesting viewpoint on the Motley Fool website. TL/DR: If Amazon is confident about the success of the deal, it makes more sense to use cash. If it is not, then it makes sense to use stock, so that they share the risk with the erstwhile Whole Foods shareholders. Also, Amazon may think that Whole Foods is undervalued, so it makes more sense to use cash.

    --
    If it weren't for deadlines, nothing would be late.