Eyebrows raised and share prices increased this week after investor Ron Burkle disclosed that his investment firm, The Yucaipa Cos., had increased its stake in Wild Oats Markets Inc. to 14.9 percent from 9.2 percent.
Burkle first invested in Boulder, Colo.-based Wild Oats last March. Securities and Exchange Commission filings at the time said the investment would be passive and that Burkle had confidence in Wild Oats' management team, specifically Chairman Robert Miller.
But the recent disclosures, filed late Friday, Feb. 3, used different language. The document says Wild Oats may engage with other persons or entities "regarding potential strategic transactions involving the company and other supermarket and retail companies."
The language "suggests a more hands-on approach and greater involvement. This represents a dramatic change and could foreshadow more aggressive efforts by Yucaipa to increase visibility on the earning power of the underlying business," Bear Stearns analyst Robert Summers said in a research note over the weekend.
Los Angeles-based Yucaipa "has had a successful history of acquiring and turning around supermarket chains," Citigroup Smith Barney analyst Greg Badishkanian said in a research note at the time of Burkle's original acquisition. That history includes buying Dominick's in 1995 for $750 million and selling it to Safeway in 1998 for $1.85 billion, and buying Ralph's in 1994 for $1.5 billion and orchestrating a $4.8 billion merger with Fred Meyer in 1997.