To partner with Amazon, suppliers are required to enter into a deal that allows the e-commerce giant the right to buy big stakes in their companies at potentially steep discounts to market value, The Wall Street Journal has reported.
The Jeff Bezos-led company has struck 75 deals over the past decade with publicly traded companies in which it gets rights, called warrants, to buy vendors’ stock in the future at a consideration below the market price, people privy to the matter told the publication.
According to the report, such deals have helped Amazon build a presence in businesses ranging from call-centre services to natural gas.
The deals in some cases also give Amazon rights such as board representation and the ability to top any acquisition offers from other companies.
The development comes at a time when the tech titan is embroiled in a row with regulators and lawmakers over its competitive practices, including with companies it partners with.
The report further noted that such unusual arrangements not only benefit Amazon but potentially suppliers too as they get the opportunity to land big contracts, which can also boost their share prices.
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According to an Amazon spokeswoman, such contracts are typically tied to milestones that the e-commerce giant Amazon has to meet, such as large purchases from the supplier.
Moneycontrol could not independently verify the report.
The report mentioned one such condition Amazon added to its long-standing partnership with grocery distributor SpartanNash Co last year. Amazon could get warrants to purchase around a 15 percent stake in the firm at a price lower than the market value if it bought $8 billion worth of groceries over seven years.
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Amazon also said it wanted to be notified of any takeover offers for SpartanNash and have a 10-day window to offer a counterbid.
The report, quoting sources, said SpartanNash executives were taken aback by such demands but ultimately chose to take the deal as Amazon was its biggest customer and being tied to the e-commerce giant could raise their company’s profile.
In its latest quarterly report, Amazon valued its warrants at $2.8 billion, more than five times the level three years ago. However, it does not reveal the value of stakes it owns by exercising its warrants.