Amazon strenghtens its presence in grocery segment

Amazon is buying Whole Foods in a deal valued at about $13.7 billion, a move that will instantly transform the company that pioneered online shopping into a merchant with physical outposts in hundreds of neighborhoods across the country.

The deal unites the online juggernaut with the grocery store chain that fell behind as the organic and natural foods it helped popularize expanded to more locations and shoppers found good enough alternatives.

Amazon already offers grocery-delivery services in five markets, but the Whole Foods purchase would let it expand to many more. Amazon also offers grocery shipments elsewhere, but that's tough with perishable foods.

The deal comes a month after Whole Foods announced a board shake-up and cost-cutting plan amid falling sales. The grocery store operator was also under pressure from activist investor Jana Partners. It also had been facing increased pressure from rivals, including European grocery chain Lidl, which is planning to enter the East Coast market, along with Aldi and Trader Joe's.

Amazon could cut costs if the technology gets good enough to deploy at Whole Foods locations. Whole Foods will keep operating stores under its name and John Mackey will stay as CEO, with headquarters in Austin, Texas.

The deal is expected to close in the second half of 2017.