Amazon’s $13.7 billion acquisition of Whole Foods sent shockwaves through the retail industry in 2017. But in a revealing new interview, the man who built Whole Foods from a single Austin store into a natural foods empire says he never wanted to sell to Amazon at all—and only did so because activist investors threatened to seize his board, fire him, and sell the company anyway.
John Mackey, the 72-year-old cofounder and former CEO of Whole Foods, disclosed the pressure campaign in an interview on the Habits & Hustle podcast with host Jennifer Cohen published Tuesday. Mackey described a tense 2017 confrontation 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.
“I met with these guys,” Mackey said, recalling how they presented a PowerPoint filled with what he characterized as inaccuracies, then refused to provide him a copy to review.
“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 said. “And then they walked out of the room.”
Jana Partners didn’t immediately respond to Fortune‘s request for comment.
Why activist investors targeted Whole Foods in 2017
Jana Partners, led by founder Barry Rosenstein, disclosed its position in April 2017, immediately calling for Whole Foods to explore a sale. The hedge fund had built its reputation on aggressive activist campaigns, previously winning board seats at companies including Tiffany and Conagra.
Whole Foods presented an attractive target. The natural and organic foods pioneer had reported declining same-store sales for six consecutive quarters, facing intensifying competition from conventional grocers selling organic products and struggling to shake its “Whole Paycheck” reputation for premium prices. The company’s operational challenges had pushed its stock price down significantly before Jana’s involvement, making it vulnerable to activist pressure.
How Amazon emerged as the solution
Faced with Jana’s ultimatum, Mackey and his leadership team considered multiple options. They weighed fighting the activist investors in a proxy battle, but recognized they needed time to lower prices and improve operations—time they wouldn’t have with hostile shareholders demanding immediate returns.
“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.”
The company briefly explored alternatives. Mackey reached out to Warren Buffett, who declined, joking about the poor brand fit between his Dairy Queen ownership and his junk food preferences. Albertsons also expressed interest, but Mackey deemed it a poor cultural match.
Then Mackey recalled waking up one morning with what felt like the answer: Amazon. He had met founder Jeff Bezos the previous year at a conference and found they shared interests in science fiction, fantasy, and scuba diving.
Within six weeks of their first meeting to discuss a potential deal, Amazon and Whole Foods announced the acquisition on June 16, 2017. 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 closed on Aug. 28, 2017, with Amazon immediately offering lower prices on best-selling grocery staples and announcing plans to integrate Amazon Prime into the Whole Foods point-of-sale system.
A win-win-win solution
For Jana Partners, the deal represented a swift and lucrative victory. The hedge fund had purchased shares between approximately $29 and $32 per share and sold its entire stake following the Amazon announcement at an average price around $42.87—netting roughly $300 million in profit in just over two months.
The acquisition wiped 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 called the Amazon deal a “win-win-win solution,” noting customers benefited from four price reductions in the first two years, 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. He has since written a memoir, The Whole Story: Adventures in Love, Life, and Capitalism, published in May 2024, which details the Amazon acquisition and his decades building the natural foods empire. Mackey now leads Love.Life, a holistic health and wellness center in El Segundo, Calif.
You can watch the full interview with John Mackey and Jen Cohen below:
First Appeared on
Source link
