The news landed on June 16, 2017: Amazon.com Inc. (AMZN) would acquire Whole Foods Market Inc. (WFM) as part of a $13.7 billion deal. Amazon would pay $42 for Whole Foods’ shares, which included debt. That price represented a 27% premium above the stock’s closing rate on June 15.
A look back at the news and rumors leading up to the deal show that the signals were there to be read — especially with access to the tools necessary to track where the two companies’ executives were traveling in the weeks and months leading up to the June 16 announcement.
Here’s a closer look at what happened leading up to the acquisition, as well as how JetTrack could have provided essential insight into the impending deal.
Early 2017: Amazon’s Interest in the Grocery Market Grows
Amazon’s official acquisition of Whole Foods wasn’t completely out of the blue. Amazon had dabbled in the $800 billion grocery market with its Amazon Fresh delivery business. But that endeavor wasn’t quite as successful as hoped, and it soon became clear that Amazon couldn’t “win the grocery game with websites, warehouses and trucks alone,” as Bloomberg reported in March 2017.
Bloomberg further reported in March 2017 on Amazon’s move to create drive-through grocery locations in Seattle, while also making investments in supply-chain software that could support a larger push into the brick-and-mortar grocery business.
Amazon had stated its goal as becoming one of the largest grocery retailers in the United States by 2025 — a goal that would require “a new wave of store and warehouse investments around the country costing billions of dollars.”
To anyone tracking Amazon and its actions in the grocery space, an acquisition seemed a viable option.
Mid 2017: Whole Foods vs. Activist Investor
As Amazon moved deeper into the grocery space, Whole Foods was losing market share and slashing its forecasts. More and more retailers had begun to offer the organic food options that Whole Foods built its brand around, and meal delivery services like Blue Apron had offered greater convenience to high-end consumers that were once willing to pay Whole Foods’ higher prices in exchange for healthier, better quality products.
In February 2017, Whole Foods announced it was closing locations and cutting its full-year sales and profit forecasts. At that time, Whole Foods had posted six straight quarters of same-store sales declines — a foreboding streak.
By mid-April, activist investor Jana Partners had amassed a nearly 9% stake in Whole Foods. It began using its position to push for change, including a shakeup on the board of directors, updates to backend systems, shifts in procurement and other proposals aimed at making Whole Foods more competitive.
News of Jana Partners’ position leaked out on Monday, April 10. After losing half its value since early 2015, Whole Foods’ stock enjoyed a sudden spike. The next day, Whole Foods’ stock tumbled again.
Here’s a look at how The Washington Post reported on Jana Partners’ investment in Whole Foods:
What JetTrack Saw Leading Up to the Acquisition
As Whole Foods’ stock price plummeted in mid-April, some investors may have sought to cut their losses and leave their positions in the company. But, if savvy investors had been using JetTrack during this time, they might have seen strong indications that something big was about to happen.
If you had been an analyst using JetTrack in April 2017, you could have searched year-to-date flights by Amazon to Austin, TX — which is where Whole Foods is headquartered. That search would have shown two flights to that point:
Monday, Jan. 9: Santa Fe, NM to Austin, TX
Thursday, Jan. 12: Houston, TX to Austin, TX
If you were then to go back to June 1, 2016, you would see that these were the only flights to Austin, TX. The plane was on the tarmac for only an hour each time, which indicates a group was dropped off on Monday and picked up on Thursday.
So, Amazon had explored the grocery space, and Jana Partners had taken its stake in Whole Foods. There was clear reason to track both companies, and then even more reason to track the companies after Amazon made a return visit to Austin on Friday, May 12 (see image above).
Using JetTrack, you could have also searched for a reciprocal flight by Whole Foods to Seattle, where Amazon is headquartered. And, when searching for flights by Whole Foods to Seattle, you would have seen there was only one flight between June 1, 2016 and the closing of the acquisition on June 16, 2017. That flight by Whole Foods to Seattle took place on April 30 — just two weeks after news of Jana Partners’ stake in Whole Foods entered the mainstream.
The Difference JetTrack Could Have Made
Jana Partners took its stake in Whole Foods in April. Amazon acquired Whole Foods in June. In July, Jana Partners sold its stake in Whole Foods for a profit of $300 million.
Investment signals can come from anywhere. There are often rumors leading up to acquisitions, and analysts can find plenty of news stories speculating about what may or may not happen.
But, in this case, JetTrack would have confirmed and validated the signals any investor may have been reading in relation to an Amazon acquisition of Whole Foods.
JetTrack’s database includes 199 total flights by Amazon.
Only four of those flights were to Whole Foods’ home city of Austin, TX.
One was the drop-off-and-pick-up situation in January 2017, just weeks after rumors emerged of Amazon’s growing interest in the grocery market.
One was in May 2017, in the window between Jana Partners’ investment in Whole Foods and the closing of the acquisition.
And one was in August 2017, just after the deal was complete.
JetTrack’s database also includes more than 50 flights by Whole Foods. Only one of those flights was to Amazon’s home city of Seattle, WA. That one flight just happened to take place days after Jana Partners’ investment in Whole Foods and two weeks before Amazon’s plane again flew to Austin, TX in mid-May 2017.
Successful investing requires the right experience, knowledge and instincts. But it’s also important to have the right information at the right time — information that other investors may not have the tools or resources to obtain. And, in this case, JetTrack could have provided the scarce information needed to enjoy a windfall return on investment.
Interested in taking a closer look at JetTrack? Contact us to learn more.