Amazon offered $13.7 billion for Whole Foods. Investors think it's worth a whole lot more. Mario Anzuoni/Reuters When Amazon on Friday announced a $13.7 billion deal to buy Whole Foods, John Mackey, the CEO of Whole Foods, could barely contain his enthusiasm.

In a town hall with employees, he gushed about the impending "marriage"— a metaphor he revisited repeatedly — that was announced six weeks after a "blind date" with Amazon that he characterized as "love at first sight."

Some Whole Foods investors are decidedly dourer, however, and it appears they have a case that the deal was consummated hastily and was in the best interests of Mackey rather than of shareholders.

Not long after it was announced that Amazon had offered $42 a share to buy the high-end grocer, the stock price began creeping above the deal price, signaling that investors believed a bidding war could emerge and drive up the final price for Whole Foods.

Walmart, Target, Costco, and Kroger — whose shares all plummeted after the deal was announced — have been named as potential rival suitors. But none has entered the fray yet, and it's uncertain whether any would have the firepower to outbid Amazon. Still, there's little evidence any of these retailers were even given a shot.

While Amazon's offer represented a 27% premium over Whole Foods' stock price, analysts and investors soon began questioning whether it was too cheap. After all, a little over two years ago the company was trading at $57 a share, which would value it at over $18 billion.

Charles Kantor, a managing director at Neuberger Berman Investment Advisers, which owns nearly 3% of Whole Foods, called the offer "thrifty" and said it undervalued Whole Foods' brand.

"I think there's the argument that Amazon acquired Whole Foods for free," he told Reuters, noting that Amazon's market cap increased by almost the same amount it was paying for the acquisition. "The reaction of shareholders suggests that Amazon has left themselves lots of room to pay more for this strategic asset."

'We just fell in love'

Mackey, who called the deal a "dream come true," appears to have had a singular focus on Amazon since his first trip to Seattle six weeks ago, possibly to the detriment of shareholders.

The initial meeting lasted all of 2.5 hours, according to Mackey, but he and three other Whole Foods execs came away smitten.

"We just fell in love," Mackey said at the town hall. "It was truly love at first sight."

Mackey had every reason to fall in love, given that he and his executive team would keep their jobs under the Amazon deal.

Activist investors, specifically the hedge fund Jana Partners, had become a thorn in his side and a threat to his power in recent months, pushing for a management shake-up.

Shortly after Jana disclosed its holding in Whole Foods in April, Mackey and his team hired a top defense banker from Evercore with more than a decade of experience battling activist and hostile investors.

Evercore helped facilitate the deal with Amazon, which would secure Mackey's future as CEO and provide some relief from the beating he'd taken in the public markets in recent years.

In the town hall, Mackey described Whole Foods as "trapped" by the short-term demands of the quarterly earnings cycle — its profits and stock price have steadily declined in recent years — and effusively endorsed Amazon's big-picture approach.

"One thing I absolutely love, love so much about Amazon is they think long term," he said. "They have had the courage that almost no other public company has had: the courage to, basically, resist the drumbeat of short-term, quarterly earnings that have had us trapped here for a couple of years, as our same-store sales came down."

When an Amazon executive told the crowd that Mackey would stay on as CEO, Mackey interrupted him to chime in with: "Until death do us part."

Walter Robb, who was co-CEO with Mackey from 2010 until the beginning of this year and remains a member of the board, embraced the deal as well. But he acknowledged at the town hall that he hadn't even met the Amazon team until the night before the deal was announced.

So did Mackey prioritize his interests at the expense of shareholders?

Could Walmart swoop in and steal Whole Foods out from under Amazon? Joe Raedle/Getty

A bidding war

An Amazon takeover of Whole Foods would almost assuredly make life easier for Mackey, but it isn't clear whether it's a good deal for shareholders.

Wall Street analysts say Whole Foods could fetch a significantly higher price for investors and that a bidding war could still erupt.

Rupesh Parikh, an analyst at Oppenheimer, said in a research note that there "could be money left on the table" and raised his target price for Whole Foods to $45.

Barclays analyst Karen Short said she thought the price for Whole Foods could go higher yet. She raised her stock-price target more than 14% over Amazon's bid, to $48, though she said the company could go for as much as $57 a share.

"Many will do anything to either make this acquisition more costly for Amazon or prevent the asset from landing in Amazon's lap," she wrote in a research note.

Short said a competing retailer, such as Walmart, could unlock up to $600 million in cost savings that could make the Whole Foods deal more profitable than it would be for Amazon.

Of course, Walmart would have to absorb the $400 million breakup fee if it outdueled Amazon for Whole Foods. But since its market value has fallen by more than $9 billion since the merger was announced, that may seem a small price to pay.