The $42-per-share, all-cash deal, expected to close later this year, includes Whole Foods' net debt and represents about a 27 percent premium to its closing stock price on Thursday.
Shares of Whole Foods rose 29 percent, to $42.68, above Amazon's offered price.
Amazon is buying Whole Foods in a deal valued at about $13.7 billion, a stunning move into brick-and-mortar retail that sets the stage for more radical store experimentation and intensified competition with grocery rivals.
Moody's lead retail analyst Charlie O'Shea said the deal could be "transformative, not just for food retail, but for retail in general".
The Amazon and Whole Foods news even had an impact overseas. But if customers know that what they are getting is the same as what they'd get at the local store, they are more likely to try it out.
Pachter said that even if Amazon gets 20 million members of its Prime loyalty program to pay $15 a month extra for AmazonFresh grocery-delivery service, that's 20 million not going to traditional supermarkets.
"This will definitely make the market more competitive", she added.
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In the US "this adds 440 refrigerated warehouses within 10 miles of probably 80% of the population", said Michael Pachter, an analyst for Wedbush Securities.
"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. Amazon could integrate it with technological advancements to improve the shopping experience, and, in turn, help Whole Foods rein in revenue. Whole Foods itself had launched an offshoot chain named after its "365" private label brand in a nod to the popularity of no-frills chains. Blue Apron and many of these other meal-kit providers are well-resourced for storing and selling fresh food, and they are already in good metropolitan areas to begin with.
Marc Perrone, head of the United Food and Commercial Workers International Union, which represents millions of grocery workers, said that Amazon's "brutal vision for retail is one where automation replaces good jobs. We are seeing very early signs here across AMZN Bookstores and the Amazon Go store in Seattle", Anmuth wrote in a note obtained by CNBC.
Customers who visit the store use an accompanied app that enables them to pick any item of their choice, and walk out without stopping at the cashier section.
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Amazon would also look to change Whole Foods' inventory, introducing its own private-label products to replace items deemed too expensive to have mass appeal, the person with knowledge of the matter said.