Activist Investor Confrontation
John Mackey, the 72-year-old cofounder and former CEO of Whole Foods Market, has disclosed that he never wanted to sell the company to Amazon but was forced into the deal by activist investors who threatened to take over his board and fire him, according to his recent interview on the Habits & Hustle podcast.
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The former CEO described a tense 2017 meeting with representatives from Jana Partners, the activist hedge fund that had acquired an 8.8% stake in the then-struggling grocery chain to become its second-largest shareholder. Sources indicate that during this confrontation, the investors presented Mackey with what he characterized as an inaccurate PowerPoint presentation and refused to provide him a copy for review., according to industry experts
The Ultimatum
“They basically said, ‘Listen, Mackey, here’s what’s going to happen. First, first thing we’re going to do is take over your board. And once we do that, we’re going to fire you. And then we’re going to fire every one of your executives that doesn’t do exactly what we tell them to do. And then we’re going to just put you up for sale to the highest bidder, and there’s not an effing thing you can do about it,'” Mackey recalled in the interview. “And then they walked out of the room.”, according to industry reports
Whole Foods’ Vulnerable Position
Analysts suggest Whole Foods presented an attractive target for activist investors at the time. The natural and organic foods pioneer had reportedly experienced declining same-store sales for six consecutive quarters, facing intensifying competition from conventional grocers selling organic products. The company was also struggling to shake its “Whole Paycheck” reputation for premium prices, and operational challenges had pushed its stock price down significantly before Jana’s involvement.
Considering the Options
Faced with Jana’s ultimatum, Mackey and his leadership team reportedly considered multiple alternatives. They weighed fighting the activist investors in a proxy battle but recognized they needed time to implement price reductions and operational improvements—time they wouldn’t have with hostile shareholders demanding immediate returns., according to recent developments
“We needed to lower our prices, but we needed time to do that,” Mackey said on the podcast. “We weren’t going to have time with Jana as investors.”, according to recent studies
The Amazon Solution
The company briefly explored other alternatives before settling on Amazon. According to reports, Mackey reached out to Warren Buffett, who declined due to brand fit concerns, while Albertsons expressed interest but was deemed a poor cultural match.
Mackey then recalled waking up with what felt like the answer: Amazon. He had met founder Jeff Bezos the previous year and found they shared several personal interests. Within six weeks of their first meeting to discuss a potential deal, Amazon and Whole Foods announced the acquisition on June 16, 2017.
Deal Terms and Aftermath
Amazon agreed to pay $42 per share in an all-cash transaction valued at approximately $13.7 billion, representing a 27% premium over Whole Foods’ closing price the day before the announcement. The deal reportedly netted Jana Partners approximately $300 million in profit in just over two months, as the hedge fund had purchased shares between approximately $29 and $32 per share and sold its entire stake following the Amazon announcement.
The acquisition had immediate industry-wide consequences, wiping out an estimated $22 billion in market value from competing grocery retailers’ stocks in a single day as investors anticipated how a combined Amazon-Whole Foods operation might disrupt traditional supermarket economics.
Mackey’s Assessment
Mackey characterized the Amazon deal as a “win-win-win solution,” noting that customers benefited from multiple price reductions, hourly employees received raises with a new $15 minimum wage, suppliers maintained their relationships and gained access to Amazon’s platform, and shareholders received approximately 40% more than the pre-Jana stock price.
“Amazon was the best solution to a problem we had,” Mackey said in the interview. “We didn’t want to sell to Amazon. It’s just that Amazon was the best solution to a problem we had. And that problem was we had shareholder activists take a large stake in the company.”
The founder, who led Whole Foods for 44 years, retired in September 2022 and has since written a memoir detailing the Amazon acquisition and his decades building the natural foods empire. Mackey now leads Love.Life, a holistic health and wellness center in California.
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References
- https://www.youtube.com/watch?v=X1i-mZ5sbcU
- https://www.janapartners.com/
- https://financialpost.com/investing/jana-partners-liquidates-two-hedge-funds-…
- https://www.washingtonpost.com/…/
- https://www.grocerydive.com/…/
- https://media.wholefoodsmarket.com/amazon-to-acquire-whole-foods-market/
- https://love.life/
- http://en.wikipedia.org/wiki/John_Mackey_(businessman)
- http://en.wikipedia.org/wiki/Amazon_(company)
- http://en.wikipedia.org/wiki/Whole_Foods_Market
- http://en.wikipedia.org/wiki/Organic_food
- http://en.wikipedia.org/wiki/Podcast
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