Amazon is buying Whole Foods for $US42 a share in cash.
So why is Whole Foods trading at more than $US43 a share?
After a brief trading halt, shares of Whole Foods jumped about 27.5% to $US42 on Friday. This matches the price per share Amazon said it will pay for the company. Theoretically, this means Whole Foods is currently worth $US42 a share.
But once levelling off at $US42, shares of Whole Foods began to creep higher, and are currently above $US43.
The move in Whole Foods suggests that some traders are willing to bet that it will be sold for a higher price, potentially the product of a bidding war if other retailers step into the fray. Speculation on potential Whole Foods buyers has circulated ever since Jana Partners, an activist investor that was encouraging a shake-up at the company, bought in.
In April, the Financial Times wrote that Albertsons was interested. Bloomberg reported that Amazon was thinking about buying Whole Foods before Jana Partners entered the conversation.
Other potential buyers could include Kroger, as the company previously bid on Fresh Market Inc., according to Bloomberg.
Karen Short, an analyst at Barclays, set a price target of $US48 for Whole Foods saying “she would not be surprised if there is a bidding war” with the goal of driving up the price for Amazon, according to a story from Bloomberg.
As you can see in the chart below, traders are betting someone will come with another offer for Whole Foods. But, even if they don’t the 1$ a share premium makes it a relatively cheap bet to make.
– Mohammad Hadi contributed to this report
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