The former CEO of Whole Foods says he didn’t want to sell to Amazon, but activists have threatened to seize his board, fire him and sell the company anyway.
Amazon $13.7 billion acquisition of Whole Foods Amazon 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 take over his board, fire him, and sell the company anyway.
John MackeyThe 72-year-old co-founder and former CEO of Whole Foods revealed the lobbying campaign in Interview on Habits and crowds Podcast With host Jennifer Cohen Published Tuesday. Mackey described a tense 2017 standoff with representatives of Jana Partners, the activist hedge fund that took an 8.8% stake in the then-struggling grocery chain to become its second-largest shareholder.
“I met these guys,” Mackey said, recalling how they gave a presentation riddled with what he described as inaccuracies, then refused to provide him a copy to review.
“Listen, Macy,” they said, “here’s what’s going to happen.” The first thing we’ll do is take over your company’s board of directors. Once we do that, we will fire you. And then we’ll fire every single one of your executives who doesn’t do exactly what we ask them to do. Then we’ll put you up for sale to the highest bidder, and there’s nothing effective you can do about it,” Mackey said. “Then they walked out of the room.”
Jana Partners did not immediately respond luckRequest for comment.
Why activist investors targeted Whole Foods in 2017
Jana partnersLed by founder Barry Rosenstein, She revealed her position in April 2017immediately calling on Whole Foods to explore a sale. The hedge fund has built its reputation on aggressive activist campaigns, Previously winning board seats In companies including Tiffany And ConAgra.
Whole Foods presented an attractive target. Pioneer of natural and organic foods reported Same store sales have declined for six consecutive quartersfaces intense competition from conventional grocery stores that sell organic products and is struggling to get rid of them “Full paycheck” reputation. For special prices. The company’s operational challenges had caused its stock price to decline significantly prior to Jana’s involvement, making it vulnerable to activist pressure.
How Amazon emerged as a solution
Faced with Jana’s ultimatum, Mackey and his leadership team considered multiple options. They considered fighting activist investors in a proxy fight, but realized they needed time to lower prices and improve operations—time they couldn’t have with hostile shareholders demanding immediate returns.
“We needed to lower our prices, but we needed the time to do it,” Mackey said on the podcast. “We didn’t have time with Jana as investors.”
The company briefly explored alternatives. Mackey approached Warren Buffett, who declined, joking about the bad branding that suited his ownership of Dairy Queen and his own. His unwanted food preferences. Albertsons He also expressed interest, but Mackey viewed it as a poor cultural match
Then Mackey remembered waking up one morning with 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 diving.
Within six weeks of their first meeting to discuss a potential deal between Amazon and Whole Foods announced the acquisition On June 16, 2017. Amazon agreed to pay $42 per share in an all-cash deal valued at approximately $13.7 billion, representing a 27% premium to Whole Foods’ closing price the day before the announcement.
The deal closed on August 28, 2017, with Amazon immediately offering lower prices on its best-selling grocery items and Announcing plans To integrate Amazon Prime into Whole Foods’ point-of-sale system.
A win-win solution
For Jana Partners, the deal represented a quick and profitable win. The hedge fund purchased shares worth between approximately $29 and $32 per share She sold her entire stake After Amazon advertised at an average price of around $42.87, generating revenue of nearly $300 million in just over two months.
Acquisition It wiped out an estimated $22 billion in market value shares of competing grocery retailers rose in one day, as investors speculated how a joint venture between Amazon and Whole Foods could disrupt the economics of traditional supermarkets.
Mackey called the Amazon deal a “win-win solution,” noting that customers benefited from four price cuts in the first two years, hourly employees got raises at a new $15 minimum wage, suppliers maintained their relationships and gained access to Amazon’s platform, and shareholders received nearly 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 that shareholder activists got a big 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 Capitalismpublished in May 2024, which details the Amazon acquisition and the decades spent building the natural foods empire. Maki is driving now Love. Lifea comprehensive health and wellness center in El Segundo, California.
You can watch the full interview with John Mackey and Jane Cohen below:
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