Saturday, April 5, 2008

Food & Politics Memo: Billionaire Supermarket Industry Investor Ron Burkle Makes Millions For The Clinton's Post-Presidency

Ron Burkle (on the right in the picture above), the billionaire supermarket industry investor, founder and chairman of the Southern California-based Yucaipa Companies investment firm, has provided former two-term President Bill Clinton, who's wife New York Senator Hillary Clinton is running for the Democratic Party nomination for President, with a healthy source of income during his post-Presidential years, according to a batch of Clinton family income tax returns the couple just released. The tax returns are interesting reading indeed.

The former President and his wife Senator Hillary Clinton released eight years' worth of income tax returns on Friday. The period covers the Clinton's last couple years in the White House to the present.

The Clinton's jointly-earned a whopping $109 million during this eight year period, the vast majority of which was brought in beginning in 2001, which was the former President's first year out of office after completing his second and final term. In fact, when Bill and Hillary Clinton left the White House in 2001, they were $12 million in debt do to extensive legal bills accumulated over the legal investigations of the Whitewater land deal, the Monica Lewinsky scandal and related impeachment proceedings, and other legal challenges.

President Clinton earned nearly half of that $109 million as a speaker, traveling all over the world between 2001 and 2006 giving speeches to corporations, business groups and other organizations for hefty per-speech fees. The tax returns don't list who he earned the speaking fees from, which would be most interesting to know.

Another big source of income for "brand Clinton" were book royalties. The former President and Mrs. Clinton brought in about $30 million between 2001 and 2006 for their best selling books; two books for Bill and two books for Hillary during this period.

But giving speeches and writing best selling books were far from the only major sources of income for former President Clinton.

In fact, one multi-million dollar source (and name) of income for the former President stands out large to us in reading through the tax returns which were posted online. That name is billionaire supermarket industry investor Ron Burkle, who is a long time Bill Clinton friend and supporter--and currently one of the most generous donors to Hillary Clinton's Presidential campaign.

Not long after the former President left office in 2001, Burkle hired Mr. Clinton as an advisor for his Yucaipa Companies investment firm. Additionally, Burkle made Clinton a partner in a number of his investment funds. Further, a bit later Burkle put the former President on Yucaipa's board of directors as well.

The tax returns show Bill Clinton's partnership with Burkle in various Yucaipa investment vehicles earning the former President and Mrs. Clinton an annual income of about $1 million a year starting in 2003. In 2005, Bill Clinton grossed $5 million from his investments with Burkle, according to the tax returns. Further, the returns show the former President earning an additional $2.5 million in each of the past two years.

All told, Bill Clinton has brought in almost $8 million dollars in income in the last five years from his involvement in and partnership with Ron Burkle and his Yucaipa investment arms. Not a bad pay day.

According to Yucaipa, Burkle hired the former President to be a senior advisor to the firm, which has included helping Burkle meet global businessman and world leaders, land new investors for his funds and identify global investment opportunities. Clinton also has served in a policy role as a member of Yucaipa's board of directors.

As we reported in this piece we wrote on January 30, the former President is in the process of ending his business relationship with Burkle and Yucaipa. It's estimated by a number of sources including the Wall Street Journal that Bill Clinton could walk away with as much as a $20 million final payout when he concludes his partnership interests in the various Yucaipa-controlled investment funds and vehicles. That's on top of the nearly $8 million earned to date.

Burkle made his name as a supermarket industry investor in the 1980's by acquiring and putting together a number of major supermarket chains into a retail grocery company he called Ralph's/Food-4-Less, and then ultimately selling the huge supermarket company for billions.

Among the chains he acquired and bundled together were Los Angeles-based Ralph's Grocery Co., Fred Meyer, Inc. (Oregon), Boy's Markets (Los Angeles), Falley's Food-4-Less (Kansas City, Mo.), Arizona-based Smitty's, Dominick's of Chicago and a few others. [Read our January 30 piece here for more details.]

Burkle, who got his start in the supermarket business as a bagboy for Stater Bros. supermarkets in Southern California where he later became a VP, operated the company with a team for about eight years, building it up, cutting costs and the like. He then broke Dominick's off from Ralph's/Food-4-Less and sold it to Safeway Stores, Inc. for nearly $2 billion dollars.

Following that profitable sale, Burkle improved sales and operations at Ralph's/Food-4-Less even further and then made the BIG sale: Kroger Co. agreed to buy the supermarket company from Burkle for $8 billion. This was the acquisition that put Kroger in the number one spot among grocery retailers in the U.S., where it remains today.

Burkle latest BIG grocery retailing deal was last year's acquisition of natural foods retailer Wild Oats Markets, Inc. by Whole Foods Market, Inc.

A little background: In the 2005-2006 time period, Burkle acquired about 5% ownership in Wild Oats Markets, Inc., making him the retailer's largest individual outside shareholder. Not long after acquiring his 5% stake, Burkle helped engineer the ousting of the grocery retailing company's then CEO, who many felt was responsible for Wild Oats' underperformance at the time. Burkle also took a seat on the fledgling natural foods' chain's board of directors.

In 2007, Burkle was a major behind the scenes force in helping to engineer the acquisition of Wild Oats by Whole Foods Market, Inc., which netted him and his Yucaipa investment firm a healthy payout. Whole Foods announced it was acquiring Wild Oats in September, 2007, with the full support of Wild Oats Markets, Inc.'s board and investors.

Burkle hasn't made a major supermarket industry investment play since last year's Whole Foods/Wild Oats acquisition-merger. However, through his various Yucaipa investment funds, he has stakes in companies of all types throughout the world (including grocery industry) as well as in the U.S.

In this piece we wrote on January 30, we said Burkle was taking a close look at SuperValu, Inc. in terms of possibly making a major investment in what many believe is an undervalued company. We learned this from a source close to both Yucaipa and SuperValu.

To date, Burkle hasn't made major investment in SuperValu that we are aware of , and it's likely he won't, since some fundamentals both at SuperValu and in the U.S. economy have changed since January, 2008. However, don't rule it completely out either--we aren't.

In fact, Burkle's deal tend to be good for the supermarket industry in our analysis. When he bundled up all the regional chains in the 1980's some were tired, smaller operations in need of shaking up Others, like Ralph's and Fred Meyer, were full of potential but just operating in a rather mediocre manner. Burkle bundled all these somewhat disperate chains together and created value--and in our view provided what at the time was some much needed "creative destruction" in the supermarket industry.

His move regarding Wild Oats is the same in our opinion. Before Burkle took his 5% stake in the natural products retailer, it was in big trouble. Whole Foods' was eating its lunch, as were many independent natural foods stores. There was nothing Wild about Wild Oats at that time--and nobody in the grocer's senior management team was even close to feeling his or her "Oats" over the natural grocery chains sales and operating performance.

Many people cry (and even cry fowl) about the Whole Foods acquisition, but it was the best thing to happen to Wild Oats--and the natural foods retailing sector. Burkle shook it up--and likely saved Wild Oats in the process, in our analysis and opinion. Whole Foods had a hand in the saving as well of course.

Meanwhile, Burkle has been very good to former President Clinton. Of course, that's a two-way street. Burkle has been a close personal friend, as well as a financial angel, to Bill Clinton since his first run for the Presidency in 1990, which he won, followed by winning a second term. It's likely that friendship has paid a handsome dividend or two for Mr. Burkle.

Ron Burkle also has extended his personal, political and financial relationship to the former First Lady and Senator from New York, Hillary Clinton, in her run for the Democratic nomination for President. According to campaign disclosure statements as well as a recent report in the New York Times, Burkle is one of Senator Clintons "Hillraisers," a title given to those key supporters who raise more than $100,000 for her Presidential campaign.

Burkle has done that--and much more. In addition to giving the maximum amount an individual can give to a Presidential candidate--which is about $5,000 ($2,500 during the primary campaign and another $2,500 for the general election)--and raising hundreds of thousands of dollars for her, including holding a lavish fundraiser at his Beverly Hills estate for the Senator from New York, Burkle also has made a six figure donation on top of all this to Emily's List, which is a women-run independent political action group that's a big supporter of Hillary Clinton for President.

Who would have thought the grocery industry would end up being such a cash cow for a former U.S. President. We bet Bill Clinton, who says one of the things he loves about no longer being President is that he gets to do some of his own grocery shopping, grins from ear-to-ear each time the supermarket clerk at the checkstand asks him if he wants paper or plastic (bags) for his grocery purchases.

No comments: