"This deal should leave no doubt that Amazon is deadly serious about dominating all aspects of retail", Paul Cuatrecasas, chief executive of Aquaa Partners, a London-based investment banking firm, said in an email.
Whole Foods, often derided as "Whole Paycheck" for its high prices, could see its reputation change if Amazon, a master at undercutting its brick-and-mortar rivals, passes any savings from automation to customers.
For instance, Wal-Mart Stores Inc (NYSE:WMT) shares slipped almost 5 percent, while Kroger Co.
Assuming the deal closed at $42 per share, Jana's stake would be worth $1.09 billion.
Vice President at Moody's Investors Service, Mickey Chadha said "supermarkets will now have to contend with not only competition with each other and non-traditional grocers like Wal-Mart Stores Inc and Target Corp, but with a retailer like Amazon which has the financial capacity to price aggressively".
Amazon is paying $42 per share for Whole Foods, which is a 27 percent premium from Thursday's night close.
"With the purchasing power that a partnership brings, and the innovation that Amazon has already introduced with its "checkout-free" grocery stores, prices for high-quality organic produce and prepared foods could decline significantly, putting pressure on a low-margin industry", noted Tom Caporaso, CEO of Clarus Commerce.
How quickly items get delivered "is going to have to be improved considerably" for customers to order something online instead of going to the prepared-foods counter at the supermarket, she said.
Online delivery of groceries so far has been tough for any company to pull off because of customers' concerns about the quality of meat and produce, said Wedbush Securities analyst Michael Pachter. That is the eighth Amazon bookstore now open around the US and more are expected in the future. It was widely reported that Jana was pressing Whole Foods to consider a sale. The deal on the surface seems valuable for stakeholders in both companies.
The supermarket chain will continue to operate stores under the Whole Foods Market brand.
In 2016 alone, Whole Foods had sales of $16 billion across its more than 460 stores in the United States, Canada and the United Kingdom.
The deal is for $13.4 billion in cash and the remainder in debt.
The transaction is subject to approval by Whole Foods Market's shareholders, regulatory approvals and other customary closing conditions, but the parties expect to close the transaction in the second half of 2017, it added.
The buy marks Amazon's largest acquisition to-date. It has expanded from a book seller into a merchant of almost all consumer products, as well as producing videos. The Whole Foods purchase may help it resolve that issue.