Last Friday Amazon (NASDAQ: AMZN) got one step closer to its retail dominance over competitor Walmart when it announced that it would acquire Whole Foods Market, Inc. (NASDAQ: WFM) for $42 per share, or approximately $13.7 billion, in an all-cash transaction. Headquartered in Austin, Texas, Whole Foods Market will continue to operate under the Whole Foods brand, and John Mackey will stay on as CEO. This deal has the potential to dramatically increase Amazon’s footprint in the retail grocery industry.

It is not clear if Whole Foods will retain relationships with its current vendors and distributors, like meal subscription service Purple Carrot with whom Whole Foods partnered last fall on an experimental basis.  The acquisition is subject to approval by Whole Foods’ shareholders and the appropriate regulatory authorities. Assuming all goes well, the transaction is expected to close in the second half of 2017.

“Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy,” said Jeff Bezos, Amazon founder and CEO, in the announcement. “Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades – they’re doing an amazing job and we want that to continue.”

“This partnership presents an opportunity to maximize value for Whole Foods Market’s shareholders, while at the same time extending our mission and bringing the highest quality, experience, convenience and innovation to our customers,” said John Mackey, Whole Foods Market co-founder and CEO.

Founded in 1978, Whole Foods was the first national “certified organic” grocer. For its fiscal second quarter ended April 9, 2017, Whole Foods reported record sales of $3.7 billion, net income of $99 million, GAAP earnings per share of $0.31, and adjusted earnings per share of $0.37. The company employees about 87,000 in 444 U.S. stores, 13 stores in Canada and 9 stores in the U.K. While the company had record sales last quarter, the company was struggling with same-store sales declining over the last seven straight quarters, reports Bloomberg.

Bloomberg also indicates an acquisition was imminent when Whole Foods investor Jana Partners, who acquired a more than 8 percent stake in the company, pushed for a buyout and threatened to boot Mackey from his CEO spot. The acquisition is Amazon’s largest. Its previous biggest buyout occurred in 2014 when Amazon acquired Twitch for $970 million in cash.

While Whole Foods is still a popular brand, its growth has stagnated and the company has been examining the performance of its stores, closing some and opening others. For example, during the second quarter, Whole Foods opened six stores, including two relocations and closed nine stores. So far in the third quarter, Whole Foods has opened three stores, including a Whole Foods Market 365 store, and it plans to open three additional stores, including one relocation during the quarter.

Also, during the third quarter, Whole Foods made some leadership changes with the goal of tightening the ship. On May 10, Whole Foods announced the appointment of Keith Manbeck as Chief Financial Officer, replacing Glenda Flanagan who is retiring. On the same day, the company announced a “significant refreshment” of its board of directors, appointing five new independent directors – Ken Hicks, Joe Mansueto, Sharon McCollam, Scott Powers and Ron Shaich – and appointing Gabrielle Sulzberger as board chair and chair of the nominating and governance committee.

If stock prices are any indication, this deal is a good one for Whole Foods. On the day before the acquisition was announced (Thursday, June 15), stock closed at $33.06 at 4 PM EDT. As of Monday, June 19 at 2:22 PM EDT, Whole Foods’ stock had risen to $43.25.

The deal was advantageous for Amazon as well, increasing its grocery footprint and driving its stock price above $1,000 per share at one point yesterday. As of 2:24 PM EDT on June 19, Amazon stock was valued at $992.89.

Insider Take:

This acquisition is a big win for both companies. Whole Foods was in need of financial and leadership support as it moves forward to ensure the brand’s long-term sustainability. Amazon also benefits, allowing the company to grow its grocery business beyond Amazon Fresh, AmazonFresh Pickup and Amazon Go, and further solidifying its dominance in the retail sector. Not everyone is happy, of course. In an interview with CBNC, Silicon Valley congressman Ro Khanna said the acquisition would hurt local grocery stores and have a negative impact on wages.

We are eager to see how this acquisition might affect Amazon Prime members. For example, AmazonFresh Pickup is available exclusively for Prime members. Members shop for thousands of grocery items online, place their order, and then reserve a time for pick-up. With the Whole Foods acquisition, Amazon could potentially extend this service to 444 additional locations across the U.S.

This acquisition has huge potential, and with Jeff Bezos as the second richest man in the world, according to Bloomberg, anything is possible.