Bi-weekly report on billionaires: Bezos brings his digital scale to Whole Foods

As Amazon makes a big bricks-and-mortar purchase, one Spanish billionaire is both praised and criticised for giving donations to fund public health care and one from Mexico is keeping his conglomerate on the benchmark index.

Before it acquired Whole Foods, Amazon spent nearly a decade trying to find a way into the fresh-food delivery business. Chip Somodevilla / AFP
Powered by automated translation

Jeff Bezos

Since its founding 23 years ago, Amazon.com has upended the business of selling books, music and just about everything else we consume – except food.

Not anymore. In one fell swoop, Amazon’s founder, Jeff Bezos, charged into the supermarket business with the US$13.7 billion acquisition of Whole Foods. The surprise deal at the weekend shakes up the $800bn grocery sector – and the broader retail industry itself – by marrying Amazon’s vast scale and digital prowess with Whole Foods Market’s 460 stores and fresh-food distribution network.

The deal will probably spur other companies to defend themselves with their own buying sprees, consolidating the fragmented industry of feeding Americans.

“This is a game changer,” said Zachary Fadem, an analyst at Wells Fargo. “It’s a warning shot for the food retail industry that competition likely heightens on top of an already challenging backdrop.”

The deal comes after Seattle-based Amazon spent nearly a decade trying to find a way into the fresh-food delivery business through various endeavours, without much success. None other than John Mackey, Whole Foods chief executive, once predicted that Amazon’s quest for grocery deliveries would be “Amazon’s Waterloo”.

Now, Mr Bezos will be Mr Mackey’s boss and the combination of those two pioneers could upend the staid supermarket business.

Amancio Ortega

Tina Fuertes, under treatment for 10 years for cancer, has a message for the Inditex founder, Amancio Ortega, after he donated US$359 million for public hospitals to fund equipment to treat the disease.

“If I saw him, I’d first give him a big hug and then I’d say thank you Amancio because you’re helping us to live,” said Ms Fuertes, 56, a teacher from Cadiz province who lost her father, mother and brother to cancer. “Spaniards have a soft spot for Amancio who is someone who built a great business from nothing and is giving something back.”

While cancer patients like Ms Fuertes praise Mr Ortega for distributing a part of his $84bn fortune, not everyone is happy with the secretive billionaire’s largesse. For some workers in a public health system assailed by the legacy of budget cuts during Spain’s financial crisis, handouts from the world’s third-richest man are neither appropriate nor ­welcome.

“Our region should not have to resort to, accept or say thank you for the generosity, altruism or charity of any person or organisation,” the Aragon Association for the Defence of Public Health said in a statement after the Ortega Foundation made a €10m donation to the Spanish ­region. Other associations representing doctors and nurses in the Canary Islands and the Basque Country have also questioned the donations.

Pablo Iglesias, the leader of anti-austerity party Podemos attacked Mr Ortega’s donation in parliament, arguing that Spain’s healthcare system should not rely on charity.

“If you have cancer, your case should be treated by the healthcare system, not a millionaire,” he said.

Mukesh Ambani

BP and Reliance Industries expanded their partnership to sell conventional fuels such as diesel and petrol, as well as renewable fuels, in one of the world’s fastest-growing energy-consuming nations.

The two will collaborate on lower-carbon transport in India, according to Mukesh Ambani, the billionaire chairman of the country’s third-largest company by market value. They will also look at setting up diesel and petrol stations in a market dominated by government-held oil-marketing companies that own about 90 per cent of all pumps.

“We are going to explore opportunities in both conventional and unconventional fuels,” Mr Ambani said in New Delhi. “The whole objective is not to do what is old-world but to try and find opportunities that are game-changing.”

In India, the companies are already partners in oil and natural-gas exploration and gas-marketing businesses. The tie up came after the oil minister, Dharmendra Pradhan, invited them to invest in the country’s ­fuel-retail sector. Their collaboration on cleaner transport comes amid plans by India to sell only electric cars by 2030 to cut oil imports and pollution.

The move will require the sale of more than 10 million electric cars that year compared with only 5,000 on the road at the end of 2016, according to the International Energy Agency.

Mr Ambani did not provide details of specific businesses being considered by the partners, but said they’ll look at “virtually all the energy needs of India and Indians”.

Ricardo Salinas

The best performer on Mexico’s benchmark stock gauge is coming up on a crossroads.

A decision by the exchange in coming months on whether Grupo Elektra is allowed to stay on the index could help extend the rally or spur a painful reckoning for investors.

Elektra, the retail and bank conglomerate controlled by the billionaire Ricardo Salinas – net worth $9.03bn – has soared by as much as 168 per cent since December, trouncing the other 34 stocks on the Mexican exchange’s IPC.

The gains stem in large part from a derivative instrument the company uses that makes its shares scarce, so that investors seeking to track the benchmark index or those looking to cover short positions in the stock must compete to buy the small portion that remains.

The company has stayed on the IPC even though it has sometimes violated membership rules that require a minimum number of shares to circulate within the market, according to data compiled by Bloomberg. After waging a legal battle to stay on the index that began in 2012, an agreement between Elektra and the stock-exchange operator that allowed it to stay has expired. Now, traders are trying to figure out whether the stock could get ejected from the benchmark when it is rebalanced in September. Some are doubtful, pointing out that Elektra succeeded in getting the bourse’s chief executive ousted the last time it sparred with the company about its float.

“The Bolsa [Mexico’s exchange operator] sees Elektra as untouchable” and would rather turn a blind eye to the issue to avoid getting into another drawn-out legal battle, said Hector Maya, an analyst at Vector Casa de Bolsa in Mexico City. “They really don’t want to get involved.”

If Mr Maya’s right, inaction by the Bolsa even in the face of rule violations could erode trust in a stock market that already suffers from a perception of lax rules enforcement by regulators, a lack of transparency and insufficient liquidity.

At the end of the first quarter, Elektra met the Bolsa’s requirement that at least 12 per cent of its shares be floated after subtracting the portion tied up in swaps, according to data compiled by Bloomberg. But the float missed the target during most of last year and has varied from as low at 7.8 per cent to as high as 20 per cent since the beginning of 2014.

“Elektra complies with all legal requirements and norms of the Mexican Stock Exchange to be publicly listed and be included in the IPC,” said company spokesman Dan McCosh. “Using the new methodology, since September 2016 Grupo Elektra has consistently met quarterly criteria for inclusion in the IPC and the company would expect to do the same in the annual rebalance.”

Hui Ka Yan

Hui Ka Yan, the chairman of China Evergrande Group, has seen his fortune surge by at least $10bn this year as shares of his property company have almost tripled.

Mr Hui’s net worth jumped by 132 per cent to reach $17.2bn, making him the sixth-richest person in China, according to the Bloomberg Billionaires Index.

Evergrande’s shares have been on an unstoppable rally this year, fuelled by a string of buy-backs and speculation that some developers will benefit from rising home sales in smaller cities amid restrictions in larger metropolises.

Evergrande’s increase, though, has exceeded the forecasts of even the most bullish stock analysts tracked by Bloomberg after ranking as the top performer in the MSCI Asia Pacific Index this year.

Mr Hui’s relative wealth gain is the second-largest in Asia this year, behind only Wang Wei whose net worth jumped by 373 per cent after his SF Holding went public in Shenzhen through a backdoor listing, according to data compiled by Bloomberg.

Mr Hui’s riches rose faster this year than those of billionaires such as Larry Page and Sergey Brin, the co-founders of Alphabet, and Microsoft’s Bill Gates.

* Bloomberg

Follow The National's Business section on Twitter