Webvan Goes To Market For HomeGrocer

The predicted consolidation of the online grocery market has begun: Webvan Group Inc. today acquired its leading competitor, HomeGrocer.com Inc., in an all-stock transaction valued at $1.2 billion. HomeGrocer.com shareholders will receive 1.076 shares of Webvan stock for each share of HomeGrocer.com stock.

"By combining the two premier online shopping and delivery service sites, we can now focus our competitive strategies against the brick and mortars," Webvan president and CEO George Shaheen said at a press conference today.

Shaheen will remain at the reigns of Webvan. Mary Alice Taylor, HomeGrocer.com's chairwoman and CEO, will stay on board only until the two companies complete the integration of their operations, according to officials.

Shawn Milne, a senior E-commerce research analyst with E-offering, says the buyout was a great strategic move to further Webvan's plans to expand nationally. "The acquisition eliminates the redundancy of capital the two online grocers would outlay for building out and competing against [each other] in the nine markets planned for 2001."

One company that may not reap the benefits of the merger is Peapod Inc., one of the originators of the online grocery business. Peapod took a major hit on Wall Street earlier this year and is still struggling following the resignation of its CEO. Though optimistic about Peapod's ability to successfully serve markets in the Northeast, Milne believes it will have trouble competing with Webvan on a national level. "In the Midwest and West Coast, the capital challenging them by this acquisition is greatly enhanced."