What’s behind the Amazon/SpartanNash deal?
Shares of SpartanNash rose 26 percent on Friday after the Grand Rapids, MI-based food wholesaler and retailer disclosed that it had entered into a commercial agreement with Amazon that includes warrants to acquire a minority stake.
Terms of the commercial agreement were not disclosed.
Under the warrant agreement, Amazon secured the rights to acquire up to 5.44 million shares of SpartanNash for $17.73 per share through Oct. 7, 2027, or an investment of $96.4 million if fully exercised, according to a SpartanNash regulatory filing. Share of SpartanNash closed Friday at $21.49, up from $17.02 at Thursday’s close.
Of the shares, 1.1 million vested at the start of the commercial agreement. The remaining 4.3 million vest once an undisclosed amount of gross payments are made through orders under the commercial agreement. If all shares are acquired, Amazon would own a 15 percent stake in SpartanNash.
SpartanNash, the nation’s fifth-largest food distributor, has been providing groceries to Amazon to support its grocery online delivery since 2016. It supplies approximately 2,100 independents, as well as some national chains. Its largest is Dollar General, accounting for 17 percent of revenues in 2019.
Speculation is the deal means SpartanNash will become the primary distributor to the new Amazon Fresh mainstream grocery concept.
BMO Capital’s Kelly Bania, in a note attained by MarketWatch, estimated the deal will more than double SpartanNash’s volume with Amazon and has the potential to significantly expand if distribution includes both PrimeNow and Fresh.
She wrote, “We estimate that like most contracts with [Amazon], margins may be lower than for independent customers. We believe that this is also a positive in adding additional diversification from [Dollar General] … although it may cause some stress in the short term.”
SpartanNash is also the largest food supplier to U.S. military commissaries and operates 155 supermarkets, largely in the Midwest.
The partnership comes after Amazon expanded its grocery delivery capacity by more than 160 percent in the second quarter and grocery pickup sites by three-fold as grocery sales tripled in the period.
- SpartanNash Company and Amazon Warrant Agreement – Securities & Exchange Commission
- SpartanNash’s stock soars after warrant and commercial agreements with Amazon disclosed – MarketWatch
- SpartanNash stock warrant offers company stake to Amazon – Supermarket News
- SpartanNash Announces New President and CEO – SpartanNash
- SpartanNash Announces Leadership Transition – SpartanNash
- Are Amazon Prime delivery shoppers disrupting Whole Foods’ stores? – RetailWire
DISCUSSION QUESTIONS: Does the deal with SpartanNash offer any insights into Amazon’s evolving grocery strategy? Do you think an acquisition of a grocery distributor would make sense for Amazon?