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CNBC reports that JPMorgan analyst Ken Goldman has written a note to clients suggesting that Sprouts Farmers Market is the “most likely” takeover target among publicly traded grocery chains, and that "Sprouts is large enough to move the needle for most large retailers but not so large as to generate huge integration or balance sheet risk.”

The analysis maintains that Sprouts’ business model - it “has relationships with farmers and is able to buy their excess produce at below-market prices and move it quickly into its stores” - gives it a differential advantage, but that it probably would make more sense if it were acquired for strategic reasons by another retailer than for it to be bought by a private equity group.

The story suggests that Amazon’s pending $13.7 billion acquisition of Whole Foods may have made Sprouts even more appetizing as a takeover candidate looking to ameliorate possible advantages that an Amazon-Whole Foods combination may create. However, “ risks do remain for Sprouts, and Amazon is one of them. Amazon Prime Now has been providing e-commerce services for 10 of Sprouts' stores, with plans to double that number in 2017 and expand the partnership further in 2018.”

There is no sense at the moment that that Amazon-Sprouts relationship is going to be terminated. But the Whole Foods deal certainly raises questions that are still to be answered.
KC's View:
This strikes me as pretty spot on, and to be honest, I wonder why Walmart is fooling around buying Bonobos when it could be buying Sprouts. The low-price message is consistent, and yet Sprouts could make Walmart a lot more effective in how it approaches the produce side of the business.

I have no idea if there could be regulatory/antitrust issues affecting a Walmart bid for Sprouts. But it would be an interesting move by Walmart to counterpunch against the Amazon-Whole Foods deal.