The deal is estimated to be worth almost $13.7 billion, at $42 per share.

NEW YORK (AP) — Online retail giant Amazon is making a bold expansion into physical stores with a $13.7 billion deal to buy Whole Foods, setting the stage for radical retail experiments that could revolutionize how people buy groceries and everything else. Amazon.com Inc. will pay $42 per share of Whole Foods Market Inc.

Charlie O'Shea, Moody's lead retail analyst, said the deal could be "transformative, not just for food retail, but for retail in general".

"Obviously the big news today is the Amazon announcement of the purchase of Whole Foods which is having effects on various sectors of the market", said David Levy portfolio manager at Republic Wealth Advisors.

The deal values Whole Foods at US$42 per share. Other retail and food distribution-related stocks in the U.S. and Europe, including Wal-Mart and Target, followed suit.

Investors are likely anxious that Amazon, once entrenched in the physical grocery store business, will ruthlessly cut prices for food products like it did with books.

With Whole Foods, Amazon gets an established business that it can transform through its technology and supply network expertise.

Consumers could also see more Whole Foods stores thanks to Amazon's financial might. The stock prices for a number of grocery companies - including Ahold Delhaize, which owns Stop & Shop, Peapod and Hannaford - have gone tumbling. Target and Walmart were each down 5 percent.

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Some say online grocery shopping will never work.

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The supermarket chain will continue to operate stores under the Whole Foods Market brand.

The Whole Foods deal represents less than 10 percent of Instacart's revenue, and that percentage has been declining as the delivery service has announced expanded partnerships with major grocery chains, most recently including Publix, Ahold-Delhaize and Wegmans.

Activist hedge fund Jana, led by Barry Rosenstein, disclosed a almost nine per cent stake in Whole Foods in April. Merger mania has produced plenty of deals over the last few decades that haven't unlocked any value for corporate shareholders or strengthened the US economy. Earlier this week rumors were swelling that Amazon had its sights on acquiring messaging technology company Slack, turns out it was Whole Foods that would be first. Gartner retail analyst Robert Hetu said Amazon could bring pieces of that to Whole Foods to further cut costs.

"It's convenience, right? We all live a busy, hectic life", Bradford said.

"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.