Investing

How Amazon’s Whole Foods Takeover Could Affect Your Money

Stacy Rapacon

It's official: Amazon got the go-ahead from regulators and Whole Foods shareholders this week to move forward with its $13.7 billion takeover of the upscale market, where you can stock up on everything from "hipster lager" ($10.99) to $34 emu eggs.

If you're a Whole Foods shopper, that means you may enjoy almost immediate relief to your wallet. Amazon wants to get rid of the chain's "whole paycheck" rep and says it plans to slash prices right away on best-selling staples like fruit, veggies, ground beef and eggs. (No word yet if that'll include emus'.)

But that's not the only way you might benefit. 

Shares of Whole Foods jumped nearly 30 percent to more than $42 apiece after the initial announcement and have remained around there since. (Amazon shares rose initially, too, though the stock has bounced around since.) 

What if I don't own Whole Foods stock?

Even if you didn't buy shares outright, you might actually own a bit of each if you have a well-diversified portfolio. Amazon and Whole Foods are both components of the Standard & Poor’s 500-stock index. So, if you invest in a mutual fund or exchange-traded fund that tracks the S&P 500, both players in this deal are part of your portfolio, along with hundreds of other companies.

So what happens to shares when the deal's done?

If you’re a Whole Foods shareholder, Amazon will buy your shares for $42 apiece once the deal is completed. Then the stock will go the way of the chain's $6 asparagus water and be yanked from the market.

If you’re an Amazon shareholder, you might enjoy another small bump once the deal closes, but be aware that the acquirer tends to have a bumpy ride over the year or so following the transaction as it adjusts to holding its new acquisition

You won't benefit as much if you own a bit of Whole Foods stock in an index fund as you would if you'd owned shares outright before the price soared. But that's okay, say advisors. The effects of a single deal like this to your portfolio should be minimal—for better or worse.

Why?

Mergers and acquisitions are “something you can't control and therefore shouldn't try to guess how they will move the markets,” says Certified Financial Planner Taylor Schulte.

A better bet is to put together a portfolio that’s well-diversified with shares of a range of companies of different sizes, sectors and locations, as well as corporate and government bonds. That way you can benefit to some degree from deals like this. But you’ll also be protected if some stocks go down. 

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