Investors seem to think that Amazon’s $42-a-share offer for Whole Foods might not be the end of the story.
Whole Foods shares were trading at $43.20 on Monday morning, signalling that the market sees the possibility of a rival bidder or enhanced offer in the offing.
The $13.7bn proposed takeover, announced Friday, sent shares of grocers and other consumer-good retailers and manufacturers reeling at the prospect of competition from the combined Amazon-Whole Foods.
But the deal still requires shareholder and regulatory approval, leaving open the possibility that something may arise between now and then to derail the bid — for example, maybe a rival bidder, encouraged by investors who may think Amazon’s bid undervalues the upscale grocery chain?
That was the question raised by Oppenheimer analyst Rupesh Parikh on Friday, who in a note said he saw the bid “as undervaluing the company’s prospects and the powerful brand. In a takeout scenario, we estimated a value in the mid-$40’s range, so it appears there is some money being left on the table.”
“We have had an anti-consensus call on WFM for some time given our confidence in the management team and a strong brand. At this point, we are raising our PT to $45 as another bid cannot be ruled out even from a defensive measure to protect against the AMZN threat.”