Amazon to seek $16 billion bond sale for Whole Foods

Bloomberg

Amazon.com Inc. is turning to the debt markets to fund the $13.7 billion acquisition of Whole Foods Market Inc. and power Jeff Bezos’s planned conquest of the supermarket business. The world’s largest online retailer is selling $16 billion of unsecured bonds in as many as seven parts, according to a person with knowledge of the matter. In a sign of market interest, the longest portion of the offering, a 40-year security may yield 1.45 percentage points above Treasuries, down from initial talk of 1.6 percentage points to 1.65 percentage points, said the person, who asked not to be identified as the deal is private.
The sale marks the first bond-market foray since 2014 for Amazon and will support the purchase of the organic-food chain, according to a company statement. The partnership, which rattled the grocery world when announced in June, is expected to reduce prices at Whole Foods, an iconic yet struggling high-end grocery trying to lure more low- and middle-income shoppers. The deal could intensify a price war in an industry beset by razor-thin margins and persistent deflation.
The e-commerce giant is approaching the market following mega bond deals from AT&T Inc. ( $22.5 billion) and British American Tobacco Plc ( $17.25 billion), and this deal is good for the year’s fourth biggest following a $17 billion offering from Microsoft Corp. It also comes at a time when tech companies have been active debt issuers, including a debut offering from Tesla Inc. on Aug. 11, and Apple Inc. announced Tuesday its first Canadian-dollar debt sale.
Amazon, whose identity straddles between a tech and retail company, has been the bane of the latter’s problems as consumer preferences have shifted to shopping online instead of in stores. That’s what makes this offering attractive and will likely be “very well-received,” said Matt Brill, a money manager at Invesco Ltd.
The bond sale also earned Amazon a two-notch credit upgrade from CreditSights.