Ron Burkle, billionaire supermarket industry investor and former bagboy for Southern California's Stater Bros. supermarket chain, is taking a long, serious look at making a major investment in fledgling grocery retailing and wholesaling giant SuperValu, Inc. we've learned.Burkle, who founded and runs investment firm Yucaipa Companies, LLC and is a close personal friend of former President Bill Clinton (Bill's also an investor in Yucaipa and stands to make about $8 -to- $9 million when he cashes out of one of its funds soon) and a major financial supporter of Hillary Clinton's Presidential campaign, likes what he sees in SuperValu.
What is it he likes? In SuperValu, Inc., Burkle sees a major, multi-banner, multi-format grocery retailer and wholesaler that's stock share price is lower than it should be, has tons of valuable assets, has what looks like a viable turnaround plan, and could benefit from an infusion of cash to help with that restructuring and a large-scale store remodeling program it's in the middle of. SuperValu, Inc. currently has about $44 billion in annual sales.
These are similar attributes, assets and liabilities Burkle has spotted, and liked, in numerous supermarket chains in the past, leading him to invest, acquire, merge, restructure and then sell, making billions as a result.
Burkle's biggest deal with Yucaipa Companies (founded in 1986), which netted him a couple billion dollars of personal profit, began about 20 years ago and involved mutiple acquisitions over an eight year period (1987-1995).
Beginning in 1987, Yucaipa Companies bought Falley's Food-4-Less of Kansas City, Mo. for $35 million. Two years later in 1989 the company acquired long-time Southern California grocery chain Boy's Markets for $375 million. In 1991 Burkle added Alpha Beta, a leading California supermarket chain, to his fast-growing food retailing empire, paying $271 million for the grocery chain.
Then in 1994, the company acquired Phoenix, Arizona-based Smitty's for $138 million. That same year (1994) also saw Burkle making his biggest acquisition to date, the $1.5 billion purchase of Southern California grocery chain Ralph's Grocery Co. He wasn't finished yet though. The following year (1995) Yucaipa Companies acquired Chicago-based supermarket chain Dominick's for $750 million.
Over this eight year period, Burkle and a senior management team operated these various supermarket chains (acquisition-by-acquisition) as an integrated company of sorts, but yet each kept it's own identity, format and positioning in its respective markets. From 1995-1997, Burkle and his team integrated the desperate operations, slashed costs, closed poorly-performing stores, built some new stores, remodeled a number of others, and improved sales and profits as a result.
In 1997, Burkle merged Ralph's/Food-4-Less with Oregon-based Fred Meyer, Inc., creating the number two food retailing company in the Western U.S. after Safeway Stores, Inc. The combined company was named Fred Meyer, Inc.
Then the selling began. In 1998 Burkle broke the Dominick's chain off from Fred Meyer, Inc. and sold it to Safeway Stores, Inc. for $1.85 billion. Yucaipa paid just $750 million for the chain less than three years earlier. Then the BIG DEAL came: Kroger Co. agreed to buy Fred Meyer, Inc. for $8 billion. You can do the math; add up what Burkle paid for all the chains above, then subtract that from $9.85 billion, the combined sale price he fetched for Fred Meyer and Dominicks, and as you can see, he made a tidy profit.
After selling Fred Meyer, Inc. to Kroger Co.--the purchase which made Kroger the number one supermarket chain in the U.S.--Burkle focused primarily on making major investments with Yucaipa, both in and outside of the supermarket industry, rather than acquisitions.
He also nurtured his close friendship with Bill Clinton. In fact, when President Clinton left office after serving his last term, he joined Yucaipa Companies' board of directors at Burkle's invitation. He also became an investor in Burkle's various investment funds--hence the $8 -to $9 million payday the former President is due when he cashes out soon, according to experts who are aware that he plans on doing so.
Burkle's most recent payday came from the acquisition of Wild Oats Markets by Whole Foods Market, Inc., a merger Burkle helped to engineer as the largest private investor in Wild Oats, as well as being its most influencial member of its corporate board of directors.
Burkle netted a couple hundred million dollars from the sale of Wild Oats in September, 2007. That money has been burning a figurative hole in the pockets of the former bagboy, who later became an executive at Stater Bros. in Southern California.
From what we hear, Burkle is close to making a major investment in SuperValu. The grocery chain and wholesaler has been having rough times since the fourth quarter of last year. Sales have been down, although profits have actually been up slightly. The company also has been struggling for well over two years to integrate its huge acqusition of Albertsons, Inc. into its culture and operations. SuperValu's stock share price has been hovering near its all-time lows, which is perhaps its biggest problem, at least in the eyes and investment portfolios of Wall Street.
Just this week however, SuperValu, Inc. CEO Jeff Noodle announced a major restructuring and store remodeling plan that Wall Street analysts might like. Burkle loves to invest large sums of cash and then become a partner with company CEO's and senior executives in restructuring and streamlining operations as a way to increase a company's value. Noddle told investors on January 24 the company is on track to remodel 165 more stores under its "Premium, Fresh and Healthy" format model between now and next year.
At the January 24 investors meeting Noodle also announced additional new initiatives for the company's Sav-a-Lot small-format discount stores and for other parts of its retail operations. He also announced the closing of Supervalu, Inc.'s Sunflower Market stores, a three year-old experimental five-store chain of small-format natural foods stores with an emphasis on low prices.
Such initiatives are music to Burkle's highly-tuned investment ears. We aren't saying the billionaire will make a sizeable investment in SuperValu, Inc. for sure. What we are saying is he's looking very closely and seriously at doing so. Further, if he does make a major investment in the company, look for him to participate in an advisory capacity to Noodle.
SuperValu, Inc. is a huge grocery industry corporation with $44 million in annual sales. As such, Burkle isn't going to gain five or six percent ownership in the company like he did with Wild Oats, which was bought by Whole Foods Market, Inc. for less than $1 billion dollars. However, a cash investment of say $1 billion by Burkle would go a long way right about now in helping SuperValu with it's massive store remodeling program.
Even more important, a Burkle investment would be a positive signal to Wall Street and the company's institutional and private investors and stockholders. In fact, such an investment, especially with Burkle attached to it in some way, would likely give SuperValu, Inc.'s stock a nice per-share boost in the short term. Stay tuned.
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