Amazon plans to buy Whole Foods for $13.7 billion

Amazon.com Inc. on Friday said it would buy Whole Foods Market Inc. for $13.7 billion as the giant Internet retailer makes a deeper push into the grocery space.

The deal is expected to close in the second half of this year. Whole Foods, a seller of natural and organic products, will continue to operate stores under its brand.

Amazon (Nasdaq: AMZN) will pay $42 a share for Whole Foods (Nasdaq: WFM) valuing the grocer at a 27 percent premium to its closing price Thursday. Whole Foods’ stock was trading at $42.67 per share mid-day Friday.

Amazon’s move initially tanked the stocks of grocery competitors as investors worried that Amazon could do to grocery the same as it did to booksellers. Kroger Co. shares  fell 14 percent, Target Corp. shares fell 12 percent, Supervalu Inc. shares  fell 19 percent, Costco Wholesale Corp. shares fell 6.2 percent, and Wal-Mart Stores Inc. shares dropped 5.8 percent.

According to a MarketWatch report, Cooper Smith, director of Amazon Research at L2 Inc., said Amazon will become a top five grocer in the United States within five years.

The supermarkets and grocery-store industry is a $611.9 billion business, according to the latest numbers from IBISWorld. Wal-Mart Stores Inc. had 14.45 percent of U.S. food and grocery market share for 2016, according to numbers provided by GlobalData Retail.Kroger Co. had 7.17 percent. By comparison, Whole Foods had 1.21 percent and Amazon, 0.19 percent.

Smith said Amazon wants to be among the top five in its core markets, places where affluent millennials can be found: San Francisco, New York City, Boston, Austin and Philadelphia.

Amazon earlier this year announced plans to build fulfillment centers in Aurora and Thornton. The Boulder Daily Camera reported that Amazon plans a smaller facility at 3550 Frontier Ave. in Boulder.

Earlier this week, Amazon Prime Now, the two-hour delivery service from online retailer Amazon.com Inc., became available in Denver.

Whole Foods has 19 stores in Colorado, including Boulder, Fort Collins, Longmont and Superior.