Amazon’s $13.7 billion acquisition of Whole Foods despatched shockwaves by way of the retail trade in 2017. However in a revealing new interview, the person who constructed Complete Meals from a single Austin retailer right into a pure meals empire says he by no means wished to promote to Amazon in any respect—and solely did so as a result of activist traders threatened to grab his board, hearth him, and promote the corporate anyway.
John Mackey, the 72-year-old cofounder and former CEO of Complete Meals, disclosed the stress marketing campaign in an interview on the Habits & Hustle podcast with host Jennifer Cohen printed Tuesday. Mackey described a tense 2017 confrontation with representatives from Jana Companions, the activist hedge fund that had acquired an 8.8% stake within the then-struggling grocery chain to turn into its second-largest shareholder.
“I met with these guys,” Mackey said, recalling how they presented a PowerPoint filled with what he characterized as inaccuracies, then refused to provide him a copy to review.
“They basically said, ‘Listen, Mackey, here’s what’s going to happen. First, first thing we’re going to do is take over your board. And once we do that, we’re going to fire you. And then we’re going to fire every one of your executives that doesn’t do exactly what we tell them to do. And then we’re going to just put you up for sale to the highest bidder, and there’s not an effing thing you can do about it,’” Mackey said. “And then they walked out of the room.”
Jana Partners didn’t immediately respond to Fortune‘s request for comment.
Why activist investors targeted Whole Foods in 2017
Jana Partners, led by founder Barry Rosenstein, disclosed its position in April 2017, instantly calling for Complete Meals to discover a sale. The hedge fund had constructed its popularity on aggressive activist campaigns, previously winning board seats at firms together with Tiffany and Conagra.
Whole Foods presented an attractive target. The natural and organic foods pioneer had reported declining same-store sales for six consecutive quarters, dealing with intensifying competitors from typical grocers promoting natural merchandise and struggling to shake its “Whole Paycheck” reputation for premium costs. The corporate’s operational challenges had pushed its inventory worth down considerably earlier than Jana’s involvement, making it weak to activist stress.
How Amazon emerged as the solution
Faced with Jana’s ultimatum, Mackey and his leadership team considered multiple options. They weighed fighting the activist investors in a proxy battle, but recognized they needed time to lower prices and improve operations—time they wouldn’t have with hostile shareholders demanding immediate returns.
“We needed to lower our prices, but we needed time to do that,” Mackey said on the podcast. “We weren’t going to have time with Jana as investors.”
The company briefly explored alternatives. Mackey reached out to Warren Buffett, who declined, joking about the poor brand fit between his Dairy Queen ownership and his junk food preferences. Albertsons additionally expressed curiosity, however Mackey deemed it a poor cultural match.
Then Mackey recalled waking up one morning with what felt like the reply: Amazon. He had met founder Jeff Bezos the earlier yr at a convention and located they shared pursuits in science fiction, fantasy, and scuba diving.
Inside six weeks of their first assembly to debate a possible deal, Amazon and Complete Meals announced the acquisition on June 16, 2017. Amazon agreed to pay $42 per share in an all-cash transaction valued at roughly $13.7 billion, representing a 27% premium over Complete Meals’ closing worth the day earlier than the announcement.
The deal closed on Aug. 28, 2017, with Amazon immediately offering lower prices on best-selling grocery staples and announcing plans to combine Amazon Prime into the Complete Meals point-of-sale system.
A win-win-win solution
For Jana Partners, the deal represented a swift and lucrative victory. The hedge fund had purchased shares between approximately $29 and $32 per share and sold its entire stake following the Amazon announcement at a median worth round $42.87—netting roughly $300 million in revenue in simply over two months.
The acquisition wiped out an estimated $22 billion in market value from competing grocery retailers’ shares in a single day, as traders anticipated how a mixed Amazon-Complete Meals operation may disrupt conventional grocery store economics.
Mackey called the Amazon deal a “win-win-win solution,” noting customers benefited from four price reductions in the first two years, hourly employees received raises with a new $15 minimum wage, suppliers maintained their relationships and gained access to Amazon’s platform, and shareholders received approximately 40% more than the pre-Jana stock price.
“Amazon was the best solution to a problem we had,” Mackey said in the interview. “We didn’t want to sell to Amazon. It’s just that Amazon was the best solution to a problem we had. And that problem was we had shareholder activists take a large stake in the company”.
The founder, who led Whole Foods for 44 years, retired in September 2022. He has since written a memoir, The Whole Story: Adventures in Love, Life, and Capitalism, printed in Might 2024, which particulars the Amazon acquisition and his a long time constructing the pure meals empire. Mackey now leads Love.Life, a holistic well being and wellness heart in El Segundo, Calif.
You’ll be able to watch the complete interview with John Mackey and Jen Cohen under:
