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Scoring an Amazon contract can make or break a company.
Last year, the food distributor SpartanNash negotiated an agreement with the ecommerce giant that could be worth as much as $8B over 7 years.
According to a report by The Wall Street Journal, there was one big catch: if that target was met, Amazon could buy up to 15% of the company.
This type of arrangement…
… is becoming commonplace for Amazon and is the latest sign of its enormous market power.
In the last decade, the company has struck similar deals — where it receives rights to buy stock (called warrants) — with 75+ private companies and at least 12 public ones, per WSJ.
The warrants often allow Amazon to acquire parts of these vendor partners for below-market rates.
Amazon’s vendor stakes could be worth $8.4B
This is up 10x over the past 3 years, per WSJ. The investments run the gamut of industries:
- Clean Energy Fuels Corp. is a natural gas supplier (Amazon can own as much as 20% of over the next decade).
- Air Transport Services Group is an aircraft-leasing company (Amazon already owns 19.5% of it).
- Startek Inc. is a call-center provider (Amazon can buy 20% of the company if the partners do $600m of business in 8 years).
No explicit ultimatum is made
But former Amazon execs tell the WSJ that vendors usually comply with warrant requests, not wanting to lose out on business.
The deals definitely can work for both sides: On the day that SpartanNash announced a deal with Amazon — including up to 15% of its company in warrants — its stock price jumped 26%.
Either way, Amazon is already facing antitrust pressure and these vendor deals could bring more scrutiny. No wonder Jeff Bezos is stepping down as CEO on July 5 and flying to space on July 20.
