Moody's puts Whole Foods on upgrade review

Moody's Investors Service said it placed Whole Foods Market, Inc.'s ratings on review for upgrade.

The ratings on review include the company's issuer rating of Baa3 and senior unsecured regular bond/debenture rating of Baa3.

The upgrade review was prompted by news that Whole Foods will be acquired by Amazon.com, Inc. for $13.7 billion in cash, which translates to about an 11x enterprise value to LTM EBITDA multiple, Moody's explained.

The upgrade review also reflects expectations that the acquisition by Amazon will improve Whole Food's credit profile as Amazon has a stronger credit profile than Whole Foods, reflected by its higher rating, the agency said.

Moody's said the review will consider the benefits to Whole Foods of being part of a larger entity, regulatory approvals and what will happen to remaining debt.

This deal combines two very recognizable brands and creates a formidable competitor in the food retailing business with broad implications for the grocery sector overall, the agency said.

As other brick and mortar retailers have come to realize the hard way that competing with Amazon is a formidable challenge, other supermarkets will now have to contend with not only competition with each other and non-traditional grocers like Walmart and Target, but with a retailer like Amazon, Moody's added.

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