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Amazon Buys Whole Foods – There’s More to the Story (Part 3 of 3)

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Touch the Soil News #733 (headquarters of BlackRock, Inc. – the world’s largest investment management firm CC SA 3.0)

Behind the scenes of the potential Whole Foods sale to Amazon, there is more at stake for the American public and particularly the investors than first meets the eye. Today, everyone assumes the stockholders of Whole Foods and Amazon will approve the deal.

So, other than Jeff Bezos who owns only 16.9 percent of Amazon stock who are some of the other big holders of Amazon stock? Come to find out, some of the largest stockholders in Amazon (besides Bezos) and Whole Foods are one and the same – the institutional investors who invest your money and the money of retirees.

For Amazon, 63.5 percent of all stock is held by institutional investors. For Whole Foods, 93.2 percent of all stock is held by institutional investors. Many investors have big stakes in both companies.

If Amazon is successful in acquiring Whole Foods, speculation is out that Amazon may want to tackle other big players in the food chain such as Costco or Kroger. Problem is that 75 percent of Costco stock is held by institutional investors and 79 percent of Kroger stock is held by institutional investors.

In the bigger picture, the largest shareholders of Amazon, Costco, Kroger and Whole Foods all have big stakes in each of the grocers (see chart below). If Amazon beats up Costco, Kroger or Walmart, the investors will have to decide if the gains Amazon makes exceed the losses inflicted on Costco, Kroger, Walmart, etc. The following chart only shows the stakes the nation’s four (4) largest investment firms have. There are dozens of other large investors that, if totaled, would show even a larger stake by institutional investors in the major grocery chains.

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Unlike the food chain of the past, the ongoing consolidations in the food chain in general and the grocery industry in particular have created an entirely new environment. Equally as impacting, is that the investment industry has experienced an equally compelling degree of consolidations. Because of the size of cross ownerships in America’s grocery chains (and many of the key suppliers), the nation is fast approaching where the nation’s food system is controlled by a handful of “kingpin” executives that manage most of the nation’s investment dollars. These investors are now in a situation where decisions on one investment can cause them harm in another investment. Perhaps getting started on your own backyard food garden is not such a crazy idea after all.

There is speculation on Wall Street that another grocer may make a bigger offer for Whole Foods. In the end, whatever happens to Whole Foods, it will be the employees and suppliers that will bear the brunt of satisfying investors in a frenzy.

For America as a whole, the biggest issue is that there are more investment dollars than there are reasonable investment opportunities. The battle of the trillion dollar investment funds – that require the sacrifice of employees and suppliers.

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