Yucaipa Cos. founder Ron Burkle, best known for his investments in supermarkets, has taken a bite out of troubled organic grocer Whole Foods Market Inc., which is facing a Federal Trade Commission challenge to its 2007 purchase of rival Wild Oats Markets Inc. Is the investment purely opportunistic, or is Yucaipa sampling the wares before a purchase?
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Based on Yucaipa's 13D filing with Securities and Exchange Commission, the firm is preparing for an activist position. Yucaipa began accruing shares in late November and now has purchased 9.81 million shares, giving it a 7% stake in the company and making it the fourth-largest shareholder. The filing noted that Yucaipa sees opportunities for the company to improve operations and its pricing while maintaining its high-quality product offering. However, the filing offers scant details as to how Whole Foods might improve operations or pricing.
Additionally, Yucaipa clearly states it plans to directly communicate with the board and reserves the right to contact other shareholders. Buried deeper in the filing is reference to a possible push for a sale of the company.
The uncertainty surrounding the FTC case has beaten down Whole Foods shares, which closed at $10.01 Wednesday before Yucaipa's 13D filing with the Securities and Exchange Commission. Shortly after the filing became public on Thursday morning, Whole Foods shares shot up about 10%,, or $1.15 to $11.16 at 1:30 p.m. Whole Foods current share price, while above its 52-week low of $7.04 a share, remains far off from its 52-week high of $42.48 a share, making it an appetizing morsel for Burkle's Yucaipa.
It is a shame Whole Foods' board has muzzled CEO John Mackey's Internet messaging because we'd really like to hear Rahodeb's thoughts on the filing and Burkle's hair. - Matthew Wurtzel
