Shares of Wild Oats Markets Inc. have risen more than 30 percent on news that a supermarket-savvy investor has taken a $19.8 million stake in the Boulder, Colo., naturals grocer.
The Yucaipa Companies, a Los Angeles private equity firm, announced March 23 that it had acquired a 9.2 percent interest in Wild Oats.
Yucaipa, founded and headed by Ron Burkle, said a day later that it would make a $150 million investment in Pathmark Stores Inc., which operates 142 stores in the New York, New Jersey and Philadelphia regions. This represented a 40 percent stake in Pathmark.
Rumors immediately surfaced that Wild Oats would be a takeover target, based on Burkle's history of turning around underperforming grocery chains. He acquired Dominick's, a Chicago-area supermarket chain, in 1995, took it public a year later, and sold it to Safeway in 1998 for $1.8 billion.
Burkle was chairman of Fred Meyer supermarkets until the Pacific Northwest chain was acquired by Kroger Co. in 1999, then served on Kroger's board of directors. There he met Robert Miller, a Kroger veteran and chairman of Rite Aid Stores, who was named Wild Oats' chairman last December.
Yucaipa officials would not comment, but Wild Oats spokeswoman Sonja Tuitele said Burkle considers Wild Oats "undervalued," that both the store chain and the naturals industry are ripe for growth, and that Miller's involvement with the company made its shares appealing.
"We view it as an endorsement for Wild Oats and as an investment in our future prospects," Tuitele said.
At 9.2 percent, Burkle is not Wild Oats' largest shareholder. T. Rowe Price, a Baltimore investment firm, holds 9.5 percent and Wellington Capital Management holds 13 percent.
Wild Oats' shares took a dive in August 2004 after a disappointing quarterly report and traded as low as $5.60 last October.
But they began to rebound in early March after several investment firms raised their ratings on the stock and closed April 4 at $9.98 per share. KeyBank Capital Markets upgraded the stock twice this spring, on March 21 raising its opinion from "hold" to "aggressive buy."