Markets Right Now: Grocer stocks plunge on Whole Foods deal

Amazon is buying Whole Foods.

Whole Foods would also pay a $400 million termination fee to Amazon if the grocer receives a better offer or the board of directors pulls the company out of the deal.

"Although Amazon is predominantly an online first retailer, this deal is clearly testament to the fact that shoppers still want a physical experience with retailers, and this caters perfectly to that", said Rupal Karia, Head of Commercial at Fujitsu UK&I. But if customers know that what they are getting is the same as what they'd get at the local store, they are more likely to try it out.

Amazon is buying Whole Foods in a stunning move that gives it hundreds of stores across the USA - a brand-new laboratory for radical retail experiments that could revolutionize the way people buy groceries. "This is where retailers need to find ways to match it and ensure they are differentiating themselves from their competitors", said Fujitsu's Karia.

Under the all-cash deal, Amazon will acquire the Texas-based champion of organic and speciality food for $42 a share.

A key area where Whole Foods may get the jump over rivals Walmart is in technology - a major strength of Amazon and an area which Walmart has been seen to lag. Whole Foods, which has faced pressure from activist investors, will continue to operate stores under its brand and will be led by co-founder and chief executive John Mackey, the companies said. Whole Foods will keep operating stores under its name.

"This deal is a clear signal of intent from Amazon to dive deeper into the grocery sector.

Whole Foods Market has been satisfying, delighting and nourishing customers for almost four decades - they're doing an awesome job and we want that to continue", Amazon founder and CEO, Jeff Bezos said in a statement.

In October, reports surfaced that Amazon was planning to build its own grocery stores.