Is Walmart Thinking About A Whole Foods Bid?

It’s been almost a week since the initial announcement of Amazon’s (NASDAQ:AMZN) intent to purchase organic grocery chain Whole Foods Market (NASDAQ:WFM) , and Wall Street is still caught up in the “what ifs” and “what will bes” of the deal.

And they should be, as the merger could turn out to be one of the biggest, and most impactful to consumers, of the year (also read: Amazon Scoops Up Whole Foods in $13.7 Billion Deal).

But on Thursday, JPMorgan (NYSE:JPM) research analysts believes Amazon’s biggest brick-and-mortar rival could potentially make a play for Whole Foods. That would, of course, be Walmart (NYSE:WMT) .

In a note, analysts Ken Goldman, Chris Horvers, and Doug Anmuth argue that Whole Foods offers Walmart a chance to interact and engage with upper-income customers. The grocery chain would also provide strong brand ownership for Walmart, and the chance to, for lack of better wording, stick it to Amazon. Over the last few years, Amazon and Walmart have begun encroaching on each other’s respective territories, becoming the other’s main competitors in many ways.

"We do think there is a chance that Walmart makes a bid," the report said. "WMT stands out as the only company in our coverage with the means and motive to counterbid, but the motive is ultimately more driven by a defensive strategy."

The analysts also see Walmart in a better position to make a bid compared to other top grocers like Kroger (NYSE:KR) , Costco (NASDAQ:COST) , or Target (NYSE:TGT) .

However, a Walmart bid wouldn’t likely win against Amazon’s $13.7 billion offer, said the analysts, “given Amazon's war chest of cash/stock and the value of the WFM platform to Amazon." Plus, Walmart already has a significant stake—over 20% market share—in the grocery space, so having the Whole Foods brand under the Walmart umbrella isn’t as important as it would be to Amazon. For the e-commerce giant, having Whole Foods is essential to expanding in the food business.

The analysts also note that Whole Foods “unusually excited” about the prospect of an Amazon takeover, and they do not think an alternative suitor would evoke the same reaction."

Investors should note that a Walmart play for Whole Foods is speculation at this point, and rumors like this are standard after big mergers are announced.

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