(CNN MONEY) Amazon (AMZN, Tech30) is making a big bet on physical stores and the business of food.

The online retail giant announced Friday that is buying organic grocery chain Whole Foods (WFM) for $13.7 billion in cash. The deal values Whole Foods at $42 a share, 27% higher than where the stock was trading Thursday.

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Amazon said Whole Foods stores will continue operating under that name as a separate unit of the company. Whole Foods CEO John Mackey will stay on to lead Whole Foods, which will keep its headquarters in Austin, Texas.

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