Retail Memo - Exclusive: Supermarket Industry Investor Ron Burkle Looking For A Seat On Whole Foods Market's Board of Directors

Legendary supermarket industry investor Ron Burkle (pictured at left), who revealed in a filing with the U.S. Securities and Exchange Commission (SEC) on Thursday, January 8 that he had bought a 7% stake in Whole Foods Market, Inc. through his Yucaipa Companies investment firm, is looking for a seat at the table, specifically a spot on Whole Foods' corporate board of directors, sources close to Yucaipa Companies tell Natural~Specialty Foods Memo (NSFM).

Based on the level of Burkle's stake in Whole Foods, the 7% ownership, combined with the fact he has decades of experience in the supermarket industry -- he started as a grocery bagger for Southern California-based Stater Bros. Markets, became an executive vice president for the grocery chain, then left to start his investment firm, where over the last couple decades he done some of the biggest deals in the food and grocery retailing business, including his cobbling together of one of the largest aggregations of supermarket chains into a whole and then selling the company, Ralphs/Food-4-Less, to Kroger Co. in the 1990's for billions -- it would seem reasonable for Whole Foods to give him a seat on the board if that's what he desires.

After all, the Leonard Green & Partners private equity firm, which bought 17% of Whole Foods Market, Inc. in December, 2008 for $465 million, has placed three people on the Whole Foods board as part of its investment. They include two members of the firm and the CEO of specialty retailer The Container Store, of which the firm is the major investor. Burkle's 7% ownership stake is more than a third of Leonard Green & Partners' 17%, from a board member-for-board member numerical perspective -- three seats for 17% for Leonard Green & Partners. Therefore from a purely numeric position he should be entitled to one seat on the board for his 7%, similar to Leonard Green & Partners' three seats based on its 17% stake in the company.

Burkle, who has donated millions of dollars to organizations working in the areas of education, worker's rights and underserved communities through his Ronald Burkle Foundation, also is far from a stranger to the Whole Foods-Wild Oats Merger. He stepped in and bought an 18% ownership stake in then independent Wild Oats Market, Inc. a number of years ago when it was on the ropes in terms of surviving.

As part of his 18% ownership stake in Wild Oats, Burkle took a seat on its board. He then led a successful campaign to oust Wild Oats' then CEO and replace him with one Burkle wanted. He also played a major operational role in restructuring the company. Burkle also engineered a deal with Kroger Co. in which the mega supermarket chain, which he held significant stock in at the time because of his sale of Ralphs/Food-4-Less to Kroger, sold Wild Oats' private label natural and organic products in all of its supermarkets, which added a nice, new revenue stream for the natural products retailer. Finally, Burkle acted as the primary driving force from the Wild Oats' corporate and investment side in engineering the acquisition of Wild Oats by Whole Foods in 2007.

Yes, you could say Ron Burkle , who among other things has made millions of dollars for his close friend former U.S. President Bill Clinton by making him an investor in Yucaipa Companies and hiring him as a special advisor to the firm, is far from a stranger when it comes to the Whole Foods-Wild Oats merger.

Whole Foods Market, Inc. has no comment on the suggestion that Ron Burkle wants a seat on the natural grocery chain's board. A Whole Foods spokesperson told NSFM the company knows nothing about it. Burkle's office also isn't confirming, nor did it deny, that Burkle wants a board seat based on his 7% ownership stake in Whole Foods.

Ron Burkle , who is one of the largest donors to the Democratic Party and endowed the Burkle Center For International Affairs at UCLA, of which he is co-chairman of, is an activist not a passive investor. For two decades his method has been to acquire or make substantial investments in supermarket companies (and other businesses) and then take a hands on approach with those acquisitions or investments, as is the case with the creation of Ralphs/Food-4-Less and his experience with Wild Oats Market, Inc. leading up to the merger with Whole Foods.

Burkle isn't a quick turn-around investor. He's willing to take time and participate in the restructuring and strategic building up of a food and grocery retailing company. However, the end game, regardless of whether it's two years or ten, is to eventually create his own exit strategy -- that's how firms such as his and Leonard Green & Partners make money -- which has historically been to either lead or participate in a merger or acquisition regarding the companies he invests in.

History generally is a pretty good indicator of current and future behavior. And in the case of Ron Burkle, there's no evidence he plans to be a passive investor in Whole Foods Market, Inc. with his current 7% ownership stake, which he has the financial ability to increase at any time.

Although we are the first publication to report Burkle's desire for a seat on Whole Foods Market, Inc.'s board, we suspect you will be reading about it elsewhere soon.

Natural~Specialty Foods Memo (NSFM) Reader Resource

More on Ron Burkle From NSFM:

>Retail Memo: FTC Asks Judge to Force Whole Foods to Put Most of the Wild Oats' Genie Back in the Bottle Pending A Resolution of its Merger Challenge

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

>Retail Memo: [Heard on the Street]: Will SuperValu, Inc. Be Supermarket Industry Investor Ron Burkle's Next Play

>More on Ron Burkle: Click here to read a piece from August, 2007 about Burkle and the Whole Foods-Wild Oats deal. As a note: NSFM has been the only publication we've found to date to suggest in the past we could see Burkle making a major investment in the combined Whole Foods-Wild Oats. He did just that on Thursday, January 8, 2009.

Ron Burkle's Rather Excellent One Year Investment Adventure With Whole Foods Market

It's been just over a year since legendary supermarket industry magnate, investor, philanthropist and friend of Bill Clinton, Ron Burkle (pictured at left), acquired a 7% stake (9.8 million shares) in natural-organic foods grocery chain Whole Foods Market, Inc. Burkle reported his stake in a SEC regulatory filing on January 8, 2009.

During the about two month period from late November 2008 -to- early January 2009 in which Burkle made his investments in Whole Foods' common stock through his Yucaipa Companies' investment firm, the natural-organic foods grocer was aisle-deep in two key struggles: it's battle with the U.S. Federal Trade Commission (FTC) over the acquisition of Wild Oats Markets Inc.; and a loss in sales due to the economic recession.

As a result of these two key factors, Whole Foods' stock share price ranged from $9.97 per share (November 24, 2008) to $10.01 per share (January 7, 2009) during the period when Burkle made his $98 million worth of stock purchases, resulting in the 7% total ownership stake in the company. We will call it an average of about $10 per share.

Today, a mere year later, Whole Foods Market. Inc. reported a whopping 79% increase in earnings for its first quarter fiscal year 2010 over the same period in 2009.

Additionally, first quarter 2010 sales increased 7% to $2.6 billion, compared to the same quarter last year. Further, same store sales, which are a key measure of a retailer's health, increased by 2.5%. Complete details are here.

Whole Foods' first quarter sales and profits report announcement today sent the natural-organic grocery chain's stock share price soaring. At the end of business today Whole Foods Market, Inc. stock was trading at $32.95 per share.

The stock has been growing like naturally-fertilized clover over the past 12 months. The 52- week low is $9.06. The 52-week average high is $34.40 per share.

Ron Burkle's excellent one year Whole Foods Market adventure

Speaking of naturally-fertilized clover, Ron Burkle is certainly waist deep in it in terms of his about 13 month profit in Whole Foods Market, Inc. stock.

Based on the average price of $10 per share he made from late November 2008 -to- early January 2009, the supermarket magnate and investor has more than tripled the value of his $98 million stake in Whole Foods in just slightly over a year.

Based on the $10 per share average purchase price, at today's $32.95 per share close, Burkle has seen a whopping per share increase of $22.95. Not bad for a one-year investment adventure.

Trust in Whole Foods board, senior management

In this story [Retail Memo - Exclusive: Supermarket Industry Investor Ron Burkle Looking For A Seat On Whole Foods Market's Board of Directors] on January 16, 2009, we reported that Ron Burkle was interested in seeking a seat on Whole Foods Market Inc.'s board, based on his 7% stake in the company.

However, to date Burkle has been satisfied to be a passive investor in the natural-organic grocery chain - a position that has obviously paid off for the supermarket industry investor.

We stick by the January 2009 report that Burkle did have an interest, however strong or weak, in possibly joining the board. But it obviously wasn't something he has pushed, since if he did we doubt Whole Foods would deny him a spot. And if the grocer did, we would have heard about it. We haven't.

Historically, Burkle has been what's referred to as an activist shareholder, an investor who buys a substantial stake in a company and then participates in some way in its operations, generally as a member of its board and often times operationally. This has been especially the case for Burkle regarding his numerous investments and acquisitions in the food and grocery retailing industry.

But it appears to date that Ron Burkle has trust in Whole Foods' current board and senior management - a trust well-founded based on the growth of the investor's just over one year investment - and as such sees no need to join the board.

Burkle hasn't been a traditional passive investor when it comes to Whole Foods Market though. In fact, we are aware that over the last year Burkle has offered numerous ideas and suggestions, including involving Whole Foods value strategy, to the grocer's board members and senior management.

But of course Burkle isn't merely a investor in supermarkets - he has extensive operations experience as an food and grocry retailing executive.

He started out in the grocery retailing business as a bag boy for the Los Angeles-based Stater Bros. supermarket chain, where he eventually became a vice president.

In addition, Burkle was the board chair of Wild Oats Markets Inc., and was instrumental in the natural grocer's merger with Whole Foods.

Ron Burkle also put together one of the biggest supermarket chain's in the U.S. - Ralphs/Food 4 Less - which he eventually sold to Kroger Co. This was what earned him the 'supermarket magnate" nickname.

Burkle focusing on books not groceries right now

Interestingly, today Yahoo, of which Burkle is an investor and has been a member of the board of directors since 2001, announced that the investor is stepping down from its board because he wants to "devote more time to his other business interests."

In the statement, Yahoo Chairman Roy Bostock said: "Yahoo and its stockholders have benefited greatly from the counsel, insights and objectivity Ron has brought to the company during his nine years on the board."

The key business interest we think Burkle wants to devote more time to is his current investment focus on the Barnes & Noble book store chain.

Burkle recently disclosed in an SEC regulatory filing that his Yucaipa Companies investment firm has acquired a 19% ownership stake in the bricks-and-mortar and online book retailer. Additionally, in that filing Burkle said he would like to own as much as 37% of Barnes & Noble.

Barnes & Noble has an anti-takeover provision which makes it difficult for investors like Burkle to acquire majority ownership in the company, something that's been suggested he would like to do. However, if he can acquire as much as 37% (and even a bit less) of the bookstore chain, Burkle will have significant influence, including a seat (and maybe even chair) on the retailer's board.

It sounds to us like we will see the "activist shareholder" Burkle rather than the more passive investor Burkle when it comes to his run on Barnes & Noble.

In fact, his profits so far in Whole Foods Market, Inc. could provide a nice cash cushion should he decide to sell some shares for his investment in Barnes & Noble.

We have no information however that Burkle plans on cashing-in any part of or all of his investment stake in Whole Foods.

Either way, it's been a rather excellent 'One Year Whole Foods Market Investment Adventure' for the supermarket magnate.

We even suppose it's been an excellent enough one year adventure to make the legendary investor willing to take a crack at one of the most difficult retailing segments in U.S. - book selling.

Investor Ron Burkle Cashes Out For A 200% Return On $98 Million Investment in Whole Foods Market

Seven degrees of Ron Burkle: Grocer, investor, philanthropist and man about town. [Photo Credit: Cityfile.com]

On February 16 we wrote in this piece [Ron Burkle's Rather Excellent One Year Investment Adventure With Whole Foods Market] about investor and supermarket industry veteran Ron Burkle's beyond excellent return (on paper) of his $98 million investment in Whole Foods Market, Inc. in just a hair over one year. (Also see the links to past stories about Ron Burkle at the link above.)

This week we learned that Burkle and his Yucaipa Companies investment firm's return on his January 2009 $98 million investment in Whole Foods, through his Yucaipa Companies is no longer - at least the majority of it - just on paper.

According to Yacaipa, Burkle has sold the majority of his shares in Whole Foods, which represented an about 7% ownership stake in the natural grocery chain, for a return of about 200% Not bad for a year's worth of investment.

In our February 16 story we suggested Burkle might sell most or all of his Whole Foods stake soon because he's currently extremely busy tending to his about 19% ownership stake in book retailer Barnes & Noble, not to mention the myriad of other investments Yucaipa has.

Burkle has been selling off the Whole Foods shares for about the last month or so as the natural grocer's share price has continued to soar.

Among Burkle's activities vis-a-vis Barnes & Noble has been a campaign he's launched to be allowed to buy additional shares in the bookseller, something its board and CEO have been blocking.

Apparently they fear an activist shareholder who puts his money behind his ideas and strategies for making what has become a laggardprimarioy bricks-and-mortar book retailer, under fire from Amazon.com and other online book retailers, a potentially better performing one. Barnes and Noble sells books online but hasn't been able to compete in any significant way with Amazon.

Burkle has told Barns & Noble's board he wants to buy up to about 38% of the company. They have put in a provision which prohibits any outside investor from acquiring more than a 20% ownership stake.

Burkle is also interested in taking a substantial stake in the storied New York City retailer Barneys. He's bought some of the struggling apparel retailer's debt and has told its foreign owners, Dubai's Istithmar World investment firm, that he is interested in lending the firm, which has been hit hard by Dubai's financial meltdown, $50 million in return for taking control of Barney's, which Burkle thinks he can return to its glory days.

The Dubai investment firm bought Barney's in 2007 for about $900 million.

Based on his track record in the supermarket retailing industry, we think if he acquired Barney's, Burkle would first invest in it, like he did when he acquired the various chains to comprise Ralphs/Food 4 Less, which he eventually sold to Kroger Co. in the 1998's for $13.5 billion.

He likely then would cut costs, in part by wringing as much cost as he could out of Barney's supply chain, something he knows a thing or two about doing in the retailing business.

We think Burkle would also extend the Barney's brand, both into opening new stores in key U.S. markets and perhaps even selectively overseas, as well as into other forms of business. The Barney's brand still has considerable equity.

After doing these and other measures, operating Barney's for a few years, it's likely Burkle would then take the company public, which could result in substantial profits if all went well in the process we describe above.

But meanwhile Burkle has exited, at least for the most part, Whole Foods Market - and done so with a nice 200% return on his $98 million investment.

He's not out of the supermarket industry investment game completely though: Burkle owns 30% of the A&P supermarket chain and is playing a major role in the east coast grocery chain's strategy, along with how it's being managed. Remember, he's an activist shareholder, and with a 30% stake he should get involved in a hands on manner.

Burkle's Yucaipa has about $9 billion worth of investment funds, according to the firm. Among its investors are two of California's biggest pension funds.

Burkle lives in Southern California and New York City. His personal worth is estimated at $3.2 billion, according to Forbes magazine, which lists him in its storied richest people in the world ranking.

Look for Burkle - who grew up in the grocery business, starting as a bag boy at Southern California's Stater Bros. grocery chain then eventually moving into a vice president position there before leaving to start Yucaipa - to make new investments in the supermarket industry. It's not only the business where he made his first and major fortune - it's also in his blood.

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.

Retail Memo: FTC Asks Judge to Force Whole Foods to Put Most of the Wild Oats' Genie Back in the Bottle Pending A Resolution of its Merger Challenge

FTC v. Whole Foods Market, Inc.

The ongoing legal battle and saga between the U.S. Federal Trade Commission (FTC) and Whole Foods Market, Inc. took a serious turn today when the FTC filed a brief asking U.S. Federal Judge Paul Friedman to order a complete halt to the integration of Wild Oats into Whole Foods (and more), a process that after more than 18 months since the 2007 merger is nearly completed. Whole Foods-Wild Oats: Two peas in a pod no more if the FTC gets its way from the judge.

The FTC says in its motion it wants the federal judge to force Whole Foods to stop any further integration activities while the multiple disputes between the regulator and the natural grocer over its acquisition of Wild Oats is handled in court. Judge Friedman is currently preparing to rule on motions filed by the FTC regarding the acquisition/merger, along with ruling on Whole Foods' lawsuit against the FTC in which the natural grocery chain is asking that the entire issue be removed from FTC jurisdiction and settled in Judge Friedman's federal courtroom.

The FTC said in its legal filing that the request is "appropriate, and reasonable" to preserve the assets of Wild Oats until the conclusion of the hearings.

This is the trifecta of pain the FTC wants to put Whole Foods Market, Inc. through: It wants the judge to order Whole Foods to rebrand (change the signs on the stores) the about 100 Wild Oats stores it's converted to the Whole Foods banner back to Wild Oats. It's legal filing also asks the judge to order Whole Foods to stop converting any remaining Wild Oats banner stores into Whole Foods. There still are a few left to be converted. Lastly, and most ominous for the natural grocer, The FTC wants former Wild Oats stores now operating as Whole Foods locations to be put in the hands of a third party, and their original signs returned, until its challenge to the merger is resolved.

The federal regulatory agency said in its filing today that if the judge rules that it has a strong enough case, it's likely it will attempt to unwind the entire merger and force Whole Foods Market, Inc. to establish Wild Oats as a standalone company and operate it that way.

The FTC has set a trial for April before an agency-picked Administrative Law Judge in which the fate of the deal is to be determined. Whole Foods' lawsuit before U.S. Federal Judge for the District of Columbia Paul Friedman asks, among other things, for that hearing to be cancelled and the FTC to be removed from determining the legal status of the merger. Instead Whole Foods wants the judge to hear the case and decide on the deal once and for all.

It appears to Natural~Specialty Foods Memo that the dramatic legal move today is the FTC's response to Whole Foods' lawsuit, which it filed in early December, 2008, as well as the natural grocer's high-profile lobbying and public relations campaign against the FTC, which we've reported on and written about extensively.

In other words, the gloves are now completely off on both sides.

Whole Foods Market CEO John Mackey shot back at the FTC today through a spokesperson and through his legal counsel, calling the FTC's request "absurd" and saying the process of integrating Wild Oats is done.

"They want us to put the toothpaste back in the tube," lead Whole Foods Market, Inc. attorney, uber-Washington, D.C. lawyer, and friend of the (Bill and Hillary) Clinton's Lanny Davis said in a statement late today. "How can you halt something that is already done?"

If the judge rules in the FTC's favor and orders Whole Foods to change the 100 or so stores back to the Wild Oats banner, stop any further integration of the few remaining stores, and to place what was Wild Oats in the hands of a "third party" as requested in the regulator's court filing today, it's our analysis that doing so would basically be the death of Whole Foods Market as you know it, a retailer that's already near death's door in so many ways.

Those ways include: a loss of income of about 42% in its last quarter; a drop in the value of Whole Foods Market, Inc. stock of about 75% in the last year; an ongoing erosion in sales, customer counts and store customer market basket purchase sizes because in the current, severe recession shoppers are trading down; and growing competition from discount-priced natural foods retailers like Sunflower Farmers Market, Sprouts Farmers Market and others, as well as increased competition from mass merchandisers like Wal-Mart, Costco and Target and supermarket chains, all increasingly selling natural and organic foods, in most cases for less than Whole Foods Market does.

We see the FTC's demands as both unrealistic -- the merger is near completed for heavens sake -- and draconian -- the financial cost of doing what the FTC is asking in this severe recession and financial/credit crisis environment amounts to basically wishing a bankruptcy filing on Whole Foods Market, Inc., or at best forcing the company to fire hundreds or even thousands of employees as a way to conserve cash; cash it will need to do the expensive things contained in the FTC's filing.

We don't like to make predictions but we must: Judge Friedman has shown himself to be a fair and even-handed judge throughout the FTC-Whole Foods legal saga since the summer of 2007 when the case was assigned to him. Therefore, it's our belief that the judge will deny all or most of the requests being made by the FTC. However, we think he might grant one, which is that Whole Foods cease any further integration of remaining Wild Oats stores into Whole Foods. But even doing that would be difficult. Why? there's no Wild Oats entity anymore. It exists essentially only in FTC world.

Of course, we could be wrong. And if we are, and if the judge were to rule completely in favor of the FTC on its filing today, we expect a drop in Whole Foods' stock share price that will be so dramatic that it could likely render the value of the retailer so low that its new, major stockholders -- supermarket industry magnate Ron Burkle, who like Lanny Davis is a BFF of the former first family (particularly Bill Clinton), and the private equity firm Leonard Green & Partners, L.P., get together and engineer some sort of an acquisition of Whole Foods Market, Inc.

Leonard Green & Partners acquired 17% of Whole Foods Market, Inc. for $425 million on December 2, 2008.

Legendary supermarket industry investor Ron Burkle, who as a major investor (he held an 18% stake in Wild Oats at the time of Whole Foods acquisition) and board member was the driving force from the Wild Oats corporate side behind the merger with Whole Foods in 2007, revealed in a filing with the Security and Exchange Commission last Thursday that his Yuciapa Companies investment firm, which counts among its investors the once poor-as-President but now multi-millionaire (thanks in part to Burkle's efforts on his behalf) former President Clinton, bought a 7% stake in Whole Foods Market, Inc.

Burkle, a billionaire, is an activist investor. He made his fortune over a two-decade period primarily by buying supermarket chains and combining them, resulting in his ultimate deal, which was the sale of his huge supermarket holding company to Kroger Co. in the 1990's for billions of dollars.

Private Equity firms like Leonard Green & Partners and activist shareholders like Ron Burkle (his Yuciapa Cos. is essentially a private equity firm) both play the same endgame -- they acquire stakes in company's, get involved in how those companies operate, and eventually look for an exit strategy that makes them a substantial profit. This most often involves a merger or acquisition.

Mark our words, with Leonard Green & Partners and Ron Burkle now holding a combined 24% ownership stake in Whole Foods Market, Inc., the natural foods grocery chain, whatever the outcome of the FTC legal case, will not end up being the same company a couple years from now (or in less time) than it has been historically or is today. After word got out on Thursday that Burkle took a 7% stake in Whole Foods, the natural grocer's stock shot up by 23% above its previous day's share price.

Meanwhile, FTC v. Whole Foods Market, Inc. continues. Stay tuned.

Natural~Specialty Foods Memo (NSFM) Linkage:

>In this story [Retail Analysis Memo: Growth and A Tale of Two Retailers-Tesco and Whole Foods Market: Is One Ripe For Acquisition and the Other Ripe For Acquiring?] on August 16, 2008 we suggested Whole Foods Market, Inc. could (then) be ripe for an acquisition. Nearly five months later, and in much more dire straights, we think the probability is even higher that it is. The only limiting factor: Does anybody want Whole Foods in Today's economic climate? Not to mention it's little FTC problem as well.

>Linked below are a couple past stories from Natural~Specialty Foods Memo (NSFM) about billionaire supermarket industry investor Ron Burkle:

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

~Retail Memo: [Heard on the Street]: Will SuperValu, Inc. Be Supermarket Industry Investor Ron Burkle's Next Play

>More on Ron Burkle: Click here to read a piece from August, 2007 about Burkle and the Whole Foods-Wild Oats deal. As a note: NSFM has been the only publication we found to suggest in the past that we could see Burkle making a major investment in the combined Whole Foods-Wild Oats. He did just that on Thursday, January 9, 2009.

Supermarket chains v. Whole Foods: The FTC is so "1986" when it comes to understanding the food and grocery retailing industry in the U.S.:

>Our argument regarding why the FTC is wrong in its legal case in which it is claiming that a combined Whole Foods-Wild Oats is a monopoly in what it calls the natural and organic premium retailing segment basically boils down to this: such a classification by the FTC is a fiction because it is irrelevant to the reality of the retailing of natural and organic products in the U.S. today in which retailers of all types and formats -- from Wal-Mart, Target, Costco, Safeway, Kroger Co., Trader Joe's, regional supermarket chains, independents and even Amazon.com, to fast-growing natural foods chains like Sunflower Farmers Market and Sprouts Farmers Market and many others -- all are battling it out in the category arena.

In August, 2007 we wrote this piece [Will the Big 3 Supermarket Chains Challenge Whole Foods in its Niche? Our answer today: Yes, in the 17 months since we wrote the piece the "Big 3" have increased their merchandising in the natural and organic foods categories significantly. For example, at the end of 2008 sales of Safeway Stores' "O' Organics" organic products store brand was over $500 million in its 1750 supermarket in the U.S. and Canada. Four years ago the brand didn't even exist.

Additionally, on the market for just a bit over a year, Safeway's "Eating Right" healthy foods brand has over $200 million in annual sales. Such sales doesn't come only from new customers. Rather, most of it comes from stealing other retailers' and manufacturers brand sales. A significant share of these new stomachs for the Safeway brands comes from consumers who used to buy like products at Whole Foods Market stores.

More NSFM Linkage:

Natural~Specialty Foods Memo reported extensively on, wrote about and offered analysis on the FTC v. Whole Foods issue and related topics in December, 2008. Below is a linked bibliography of all of our December stories and posts:

December 29, 2008: Retail Memo - Breaking News: New Seasons Market Doesn't Turn Over Trade Secrets to Whole Foods Market Despite Deadline to Do So Being Today....December 29, 2008: Independent Grocer Memo: Natural-Organic, Local, Fresh and Premium Keys to Pacific Northwest USA's Haggen Foods; Now Adding Value....December 28, 2008: Retail Memo: Web Site and Blog-Driven Viral Boycott of Whole Foods Market Stores in Portland, Oregon Region Going On; Could it Intensify?....December 28, 2008: Retail Memo: Tomorrow Deadline For Portland, Oregon's New Seasons Market to Turn Over Trade Secrets to Whole Foods Market's Legal Counsel

December 24, 2008: Christmas Eve Memo 2008: 'Twas the Night Before Christmas' - FTC v. Whole Foods Market, Inc. Version....December 24, 2008: Independent Grocer Memo: From Mrs. Gooch's to the Auto Body Business, Then Back to Retail, Chris Kysar is On A Healthy Organic Foods Retailing Roll....December 24, 2008: Retail Memo: It's 'Deja Vu All Over Again' - Judge Paul Friedman to Whole Foods Market, FTC: 'What's My Role Here?'....December 23, 2008: Retail Memo: FTC Postpones Scheduled February 16 Administrative Hearing on Whole Foods-Wild Oats Deal Break-Up Until April 6, 2009....December 23, 2008: Independent Grocer Memo: National Grocers' Association Asks President-Elect Obama to Look Out For Independent Grocers When He takes Office in January....

December 22, 2008: Retail Memo: Only Slightly More Than Half the 93 Natural Foods Retailers Issued Subpoenas By Whole Foods in its Case against the FTC Have Complied.... December 22, 2008: Retail Memo: Whole Foods Market Wants to Depose and Obtain Internal E-Mails From FTC Commissioner, Suggesting Possible Conflict of Interest Situation....December 22, 2008: Retail Memo: At Hearing Today Judge Tells FTC to Provide Road Map of How Whole Foods Could Take About Merged Companies Should Ruling Go In its Favor....December 19, 2008: Retail Memo: Whole Foods' Lobbying Effort Baring More Fruit - House Committee Leaders Send Letter to FTC Chair Similar to One Sent By Senate Leaders....

December 18, 2008: Retail Memo: 'This Isn't Over Yet' - New Seasons Market CEO On Judge's Decision the Natural Gorcer Must Turn Over Trade Secrets to Whole Foods Market.... December 18, 2008: Retail Memo: The 'Whole Primary Source Scoop' -- FTC and U.S. Federal Court Documents on the FTC v. Whole Foods Market, Inc. Case....December 17, 2008: Breaking News: Judge Orders New Seasons Market to Comply With Whole Foods' Subpoena and Submit Sales Data, Financial Records and Other Trade Secrets....December 16, 2008: Retail Memo: Whole Foods, Wild Oats and Boulder, CO...And the Rocky Mountain News' Editorial Take On FTC v. Whole Foods Market, Inc....

December, 15, 2008: Retail Memo: Eight Members of U.S. Senate Judiciary Committee Send Letter to FTC Chairman Regarding FTC's Legal Case Against Wild Oats' Acquisition....December, 13, 2008: Retail Memo - Analysis & Commentary: More On FTC v. Whole Foods Market, Inc. and Whole Foods Market, Inc. v. FTC....December 9, 2008: Organics Category Memo: Wither Organics? Organic Food & Grocery Category Sales Down; But Double-Digit Growth Still Likley With Mass Market Lift....December 9, 2008: Retail Memo: Whole Foods Markets' 'Whole Legal Paycheck:' Three Top Washington, D.C. Law Firms Teaming Up On The Natural Grocery Chain's FTC Lawsuit....

December 9, 2008: Retail Memo: Whole Foods Market CEO John Mackey and Team Launch First Aggressive Attack Against the FTC's Legal Case at Press Conference This Morning....December 8, 2008: Retail Memo: Mr. Mackey (and the Whole Foods Market Troops) Goes to Washington....December 8, 2008: Retail Memo: Breaking News - Whole Foods Market, Inc. Files Lawsuit Against the FTC; Argues the Regulator Violated the Company's Due Process Rights....December 7, 2008: Retail Memo: New Seasons Market CEO Brian Rohter and Whole Foods Market Co-President Walter Robb Discuss and Debate the Subpoena Issue Online....

December 7, 2008: Retail Memo: New Seasons Market CEO Brian Rohter Speaks Out Again Today on the Whole Foods Market, Inc. Subpoena of His Company's Data....December 7, 2008:Retail Memo: Whole Foods Market Retains Top Washington D.C. lawyers and Politically-Connected Lobbyists to Plead its Case Against the FTC....December 6, 2008: Retail Memo: Fast-Growing and Scrappy Sunflower Farmers Market Ventures Deep in the Heart of (Whole Foods Country) Texas....December 6, 2008: Retail Memo: Fast-Growing NF Chain Sunflower Farmers Market Responds to Whole Foods Market, Inc. Subpoena For Sales, Financial and Related Information....

December 3, 2008: Retail Memo: More on the Whole Foods Market-New Seasons Market Subpoena Issue; FTC Holding Firm For February, 2009 Hearing....December 2, 2008: Retail Memo: Whole Foods Market, Inc. Closes $425 Sale of Stock to Private Equity Firm; Adds Members of the Firm to its Board of Directors....December 2, 2008: Retail Memo: Portland, Oregon-Based New Seasons Market CEO Brian Rohter Responds to Whole Foods Market's Paige Brady....December 2, 2008: Retail Memo: Whole Foods' Paige Brady Responds to Yesterday's New Seasons Market Piece; Lots of E-Mails; Issue Heats Up On the New Seasons Market Blog....December 1, 2008: Retail Memo: Whole Foods Wants A Court-Mandated Financial Records Dump from Portland-based New Seasons Market; it Says For its Battle Against the FTC.

FTC v. Whole Foods - Linkage from the Natural~Specialty Foods Memo archives:

Click here, here and here for stories about the FTC-Whole Foods issue from our archives, including pieces about mass market and natural foods class of trade retail competitors.

[Note: Natural~Specialty Foods Memo holds no Whole Foods Market, Inc. stock at present.]

Retail Memo: [Heard on the Street]: Will SuperValu, Inc. Be Supermarket Industry Investor Ron Burkle's Next Play

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.

The Friday Fishwrap

News, facts, info and resources you can use...all wrapped up for you

Whole Foods gets a green light on Wild Oats buyout...Late Thursday a federal judge gave a tentative green light to supernatural grocer Whole Foods Market, Inc.'s buyout of industry rival Wild Oats Markets, Inc. In his ruling, the federal judge rejected comments from the U.S Federal Trade Commission (FTC) that the deal would stifle competition and lead to higher retail prices. The federal judge, Paul L. Friedman, denied a request from the FTC to temporarily block the $565 million deal. Judge Friedman's reasoning behind his decision was filed in a 93-page document that was sealed because it contains corporate secrets. The federal government, led by the FTC, has said it would appeal such a ruling.

The FTC could appeal the ruling to a higher court, and industry observers say it's likely the FTC will seek a stay of the ruling pending appeal. Whole Foods and Wild Oats both said they have agreed with the FTC to not close the deal prior to noon on Monday, August 20, 2007. Absent a stay pending appeal the two grocers could close the deal anytime after noon on August 20th.

Commentary:
This tentative green light given by judge Friedman is the first step for Whole Foods in finalizing the Wild Oats buyout. It seems the FTC is determined to appeal the decision but it isn't likely they will get anywhere with their appeal, although they might hold up the buyout for some time.

In terms of the anti-competitive issue, it just doesn't wash. This is the same FTC that gives the ok to mega financial industry and oil industry mergers, two industries in which there are real anti-competitive and pricing issues. However, when it comes to a niche industry like natural foods retailing, the FTC gets out it's guns and does battle. Talk about mixed up priorities. Supernatural grocers like Whole Foods and Wild Oats are actually competing more with supermarkets--especially upscale retailers--than they are with other natural foods store retailers. This is even more true for Whole Foods.

Unfortunately, the days of independent natural foods stores competing with Whole Foods are pretty much gone, with a few exceptions. Additionally, even combined, Whole Foods and Wild Oats are relatively small players in the overall retail grocery industry. Look at it this way, Whole Foods currently has 190 stores. Wild Oats has about 110 stores. That gives Whole Foods 300 stores after the buyout--and they will likely need to close a number of the Wild Oats stores. (Whole Foods already plans on selling 35 of Wild Oat's Henry's and Sun Harvest banner stores and a distribution center in Southern California to a subsidiary of Los Angeles-based retailer Smart & Final, Inc.)

That store count is about the same of many regional supermarket retailers. In California alone regional grocers Save Mart and Raley's Superstores each have close to 300 stores and only serve the northern and central portions of the state. Safeway Stores, Inc. has double the Whole Foods/Wild Oats combined store count in California alone. So the anti-competitive argument just doesn't wash.

The second main argument that the Whole Foods buyout of Wild Oats will lead to higher prices is just on the face of it laughable. You can tell the FTC staff doesn't know much about Whole Foods' business model. Whole Foods already gets a premium price point in their stores--and Wild Oats has never been enough of a competitor to have ever forced Whole Foods to lower its retails except for a short period of time when, for example, they were launching a new store in a new city or neighborhood. Whole Foods will increase it's retails (and margins) when it feels the particular market it's in will bare it. Buying Wild Oats--which currently exerts minimal competitive pressure on Whole Foods--will not be a causative factor if and when Whole Foods increases it's retail prices.

In fact, it's the Kroger's and Wal-Mart's of the retailing world who have already caused Whole Foods to review--and in some cases lower--it's retails on natural and organic groceries and related goods. This is another example of why Whole Foods' primary competition today is supermarket retailers and a few mass merchandisers, and other natural foods retailers are a distant second in terms of Whole Foods competition.

The FTC needs to let this buyout bloom. Let Whole Foods and Wild Oats get to the busy task at hand of integrating Wild Oats into Whole Foods. Let the Wild Oats employees know who their new employer is rather than making them wait in limbo as the FTC appeals the deal.

Combining Wild Oats intoWhole Foods will actually be better for consumers. Whole Foods is the superior grocer of the two. They will bring their merchandising style and corporate mission to the Wild Oats stores, which will help not hurt. The additional store count will allow Whole Foods better bargaining power with vendors; and I doubt if there will be any price increases of any kind for some time after the buyout/merger. Whole Foods management is way to smart for that.

So let the Whole Foods buyout bloom FTC. There are petroleum oligopolies out their requiring your attention, massive financial industry consolidation, and billion dollar anti-competitive, no bid contracts, going to defense contracting firms that didn't even exist a few years ago. Priorities, priorities. You can rest assured American consumers will be just fine--actually better--when Wild Oats becomes part of Whole Foods Markets, Inc. You did a good job reviewing the buyout, as you should. Now it is time to let it go through.

(The writer owns no stock in either Whole Foods Markets, Inc.or Wild Oats Markets, Inc.)

Notes: You can read the text of the Federal Trade Commission press release opposing judge Friedman's decision here:http://www.ftc.gov/opa/2007/08/wholefoods.shtm
You can read Whole Foods Markets, Inc.'s press release in response to judge Friedman's ruling here:
http://www.wholefoodsmarket.com/investor/pr07_08-16.html

Personality profile brief...Speaking of the Whole Foods Market, Inc. and Wild Oats Markets, Inc. buyout/merger, one food industry financier who stands to make a large pot of gold off the deal is Los Angeles California-based billionaire Ron Burkle. When Wild Oats was at its lowest corporate point a few years ago Burkle stepped in and made a major investment in the company through his Yucaipa Companies investment firm. Today Burkle is Wild Oats' largest outside investor, owning about 15% of the grocer's outstanding stock shares.

Burkle, who started working in the retail grocery business as a young bag boy, and later was an executive with Stater Bros.Markets in Southern California, made his fortune by buying, consolidating and selling supermarket chains primarily in Southern California. His Yucaipa Companies firm formed a large retail grocery company called Food For Less Holdings Inc., made up of a number of different retail grocery companies banners, which he acquired. He then bought the Ralph's Grocery Company, Southern California's market share leader neck to neck at the time with the Von's Companies. He also had retail holdings outside California as part of Food For Less Holdings, Inc. Burkle eventually sold this company to Kroger, and it made him a billionaire.

Since that sale Burkle, who also is close personal friends and was a major financial donor to former President Bill Clinton, has used the Yucaipa Companies to invest in many other retail grocery companies, either holding his shares for a time and selling at a profit, or helping to engineer buyout or mergers. Burkle also was a major donor to Clinton's Presidential Library and supports the former President's charitable foundation with generous donations. Burkle and former President Clinton also have a business relationship in that the ex-President is a member of the Yucaipa Companies' board of directors. Yucaipa Companies currently has ownership stakes in Pathmark stores and Supervalue, in addition to Wild Oats in the retail grocery industry.

Burkle also had been involved in making bids in companies outside the grocery industry in recent years. Most recently he was involved in trying to put together an investment group to acquire the Los Angeles Times newspaper, and then it's parent company Tribune Media Group. His group didn't get the deal but he continues to look closely at other media investments, an area that seems to interest him of late. Various financial publications have had him interested in The Gannet Newspaper chain and Dow Jones, the parent company of the Wall Street Journal, which was just purchased by media-mogul Rupert Murdock

Whole Foods has offered $18.50 per share for the Wild Oats stock. Burkle's share price when he made his investments was just a fraction of that. Since he owns 15% of Wild Oats he stands to make a substantial windfall from the deal. However, he also took a substantial investment risk in investing in Wild Oats at the time he did so. There was talk at the time about a possible bankruptcy filing, and most industry players and observers had basically counted the grocer out. Burkle not only invested in Wild Oats but he took a fairly hands on role in terms of CEO selection and other operational aspects of the grocer's business. Most industry people also believe Burkle played a major role in engineering the Whole Foods/Wild Oats buyout/merger. Few would suggest that based on his risk and involvement he doesn't deserve the pay off in the deal.

The proceeds from the Whole Foods/Wild Oats deal will give Burkle and his Yucaipa Companies a major infusion of new capital--so it's likely Yucaipa Companies will be looking for their next major retail grocery industry investment soon. Yucaipa has a keen eye for retail grocery chain investments, so any company they invest in is watched closely by Wall Street as well as the industry.

News Briefs, factiods and information

Stater Bros. Markets, a stallworth supermarket retail chain based in Southern California's Inland Empire region, is making a massive investment. The chain, which operates 163 stores in the Inland Empire region, is spending $300 million on a new 2.1 million square-foot distribution center in San Bernardino, California. This facility will allow Stater Bros. to consolidate it's now 11 distribution building, which are in seven seperate locations in four nearby cities. The combined total size of these 11 buildings is 1.6 million square feet. The new facility will not only give Stater Bros. one central location but considerable more square footage as well. David Merrefield, Editorial Director for Supermarket News, has a good editorial on the Stater Bros. investment in the August 13, 2007 online issue of the publication. You can read David Merrefield's editorial on the Stater Bros. investment here:http://supermarketnews.com/viewpoints/stater_bros_makes/

Fresh & Easy opening fast & breezy...Mega British retailer Tesco plans to have 30 of it's Fresh & Easy Neighborhood Markets open by Christmas. The retailer also says it plans to have an additional 20 stores opened by February, 2008. Beyond that Tim Mason, Tesco's CEO for U.S operations, says the British-based international retailer has 100 more locations in the pipeline. Stores are set to open in the October-November, 2006 time frame. Mason says the first 12 stores will all be in Southern California.

The 10,000 square-foot Fresh & Easy Neighborhood Markets are a hybrid convenence store/small supermarket/food service concept. The stores will merchandise fresh, high quality prepared foods, specialty and natural foods, a full line of persihables in every category, and have many other unique features for a format of that size, in addition to selling basic grocery items. Mason says the new stores are going to be in areas with different demographics and income ranges.

The July-August, 2007 issue of the publication Cooperative Grocer, has a short feature article on a brand new 17,000 square foot cooperative supermarket that recently broke ground in Northampton, Massachusetts. The market, named RiverValley Market, is scheduled to open in early 2008. One of the market's focuses will be on purchasing and selling locally grown products as much as it can. Cooperatives are often lost when it comes to natural and specialty foods marketing today. But there are hundreds of co-op markets still in the U.S. and as this article suggests new ones continue to open. You can read the article from Cooperative Grocer here: http://www.cooperativegrocer.coop/articles/index.php?id=741

Retail Memo: 'God And Man at Yale' - The FTC-Whole Foods Settlement Talks: Whole Foods CEO John Mackey Speaks Out at Yale University

FTC. v. Whole Foods Market, Inc. - Settlement Talks

In a series of recent stories on the U.S. Federal Trade Commission (FTC) v. Whole Foods Market, Inc. case, in which the FTC is attempting to break-up Whole Foods' 2007 friendly acquisition of then rival Wild Oats Market, Inc., we reported that based on our sources the current negotiations between Whole Foods and the FTC are proceeding well, and that the probability of the two parties reaching a settlement are looking good.

You can read those stories here: [Thursday, February 5, 2009: Retail Memo - Breaking: FTC Delays Whole Foods Merger Opposition Case Another 30-Days For Settlement Talks; Progress Towards A Deal Remains Positive.] [Tuesday, February 3, 2009: Retail Memo - Breaking Developments: FTC, Whole Foods Market, Inc. Progressing in Settlement Talks; Could the Negotiated End-Game Be Near?] [January 29, 2009: Retail Memo - Breaking: Whole Foods Makes Settlement Offer to FTC; FTC Halts Action For 5 Days; Natural~Specialty Foods Memo Calls For A Settlement.] Note in the January 29 piece, before full settlement talks began, Natural~Specialty Foods Memo (NSFM) called for both sides to work out a deal.

As we've reported, the FTC has halted all of its legal activity designed to overturn the Whole Foods-Wild oats merger until March 6, 2009, so that the two sides can continue their settlement talks and resolve the deal outside of court. The FTC has an Administrative trial set for April 6 which will result in a ruling by the federal regulator on the merger. Whole Foods is hoping to work out a deal with the FTC before the April 6 trial date.

John Mackey Speaks at Yale

Natural~Specialty Foods Memo (NSFM) recently found out from a reader that Whole Foods Market, Inc. co-founder and CEO John Mackey was giving two speeches or lectures at Yale University yesterday, Tuesday, February 10.

The topics of the lectures, which Mr. Mackey did give at Yale yesterday, were "Conscious Capitalism," in which he talks about the philosophy the principles of Whole Foods Market's business philosophy which he has gleaned from various thinkers, and "A Vision of Sustainable Agriculture and Healthy Eating in the 21st Century." Mr. Mackey has given speeches and lectures on the two topics at a number of other U.S. Universities, as well as to various groups.

Because we've been covering, reporting on, writing about and offering analysis on the FTC v. Whole Foods Market merger case and issue, and because Whole Foods' CEO John Mackey seldom ever disappoints when it comes to talking about hot button issues (like FTC v. Whole Foods) regarding Whole Foods Market when he does speak publicly, Natural~Specialty Foods Memo (NSFM) had a correspondent attend the two lectures and provide notes on what if anything CEO Mackey said about Whole Foods' current settlement negotiations with the FTC over the 2007 merger.

And John Mackey didn't disappoint.

At Yale University yesterday, Whole Foods' CEO Mackey told the lecture crowd that he is anticipating that there will be a settlement reached between the natural foods grocery chain and the FTC soon.

"Hopefully, there will be an announcement in the next couple of weeks," Mr. Mackey said. That's just about how long is left in the FTC's legal halt order, which expires on March 6.

Beyond that John Mackey didn't offer any details of the current settlement negotiations. He did say during a lecture that Whole Foods brought an initial offer to the FTC to get the ball rolling, which is something we've previously reported.

However, the fact that Mr. Mackey would offer such optimism about a settlement likely being reached in the next couple weeks suggests strongly to us he is rather confident that will be the case. If not, he wouldn't likely have even brought it up considering how serious and important the current negotiations are for the natural foods grocery chain. Would he?

In fact, John Mackey has taken a back seat in the entire FTC v. Whole Foods case since it began heating up again in late November of last year -- to the present. Instead he has let his top executives, Jim Sud and Walter Robb, be the Whole Foods' corporate faces and voices on the issue and legal case. Yesterday, during the Yale University lectures, was one of the few times the Whole Foods Market, Inc. CEO has said anything publicly about the issue in many months.

One of the reasons this is the case is because there is bad blood between a couple of the FTC Commissioners and Mackey over public statements he's made over the years about wanting to dominate U.S. natural foods retailing, as well as over the highly publicized news that came to light in 2007 that for at least a couple years prior as CEO of Whole Foods Market John Mackey had used the pseudonym "rahodeb" to post negative comments about Wild Oats Market, Inc. and its then CEO on Yahoo Finance message boards and other finance-related Internet chat boards. Mr. Mackey has explained that "rahodeb" was a variation of his wife's first name -- Deborah.

The nature of the posts "talked down" Wild Oats as a natural products retailer and included posts suggesting the company needed to be acquired by a superior natural foods retailer, that its stock was overvalued, and that it was headed for bankruptcy, among other things.

Mr. Mackey made such posts right up to the 2007 merger deal between Whole Foods and Wild Oats. After it was discovered that John Mackey was "rahodeb," the U.S. Securities and Exchange Commission (SEC) launched an investigation of the CEO's postings on the finance-related message board. The SEC found he had broken no laws and ended the investigation.

Below (in italics) are a couple of the "rahodeb" post he made on Yahoo Finance:

March 26, 2006: "OATS has lost their way and no longer has a sense of mission or even a well-thought-out theory of the business. They lack a viable business model that they can replicate. They are floundering around hoping to find a viable strategy that may stop their erosion. Problem is that they lack the time and the capital now.”

Another post John Mackey made on Yahoo Finance as "rahodeb": "Would Whole Foods buy OATS? Almost surely not at current prices…What would they gain? OATS locations are too small. Wild Oats’ management clearly doesn’t know what it is doing." The company, he wrote:, "Has no value and no future."

At least one of the FTC Commissioners appears to believe that Mr. Mackey skated on the "rahodeb" postings in which he "talked down" Wild Oats, which was being operated in a less than stellar manner and doing poorly. But since nobody reading the "rahodeb" posts knew at the time they were being made by the Whole Foods' CEO, it's hard to believe, despite the fact we think his doing so was a bit foolish, that the negative comments about Wild Oats had any material effect on the company. After all, for the comments to have any influence, investors and others would have to take seriously the postings of "rahodeb" on Yahoo Finance.

Its our analysis though that this incident, along with public comments John Mackey had made for many years about wanting to dominate natural foods retailing with Whole Foods, has influenced the hard line against the merger the FTC has taken. We have no proof of that but believe it to be the case based on our extensive reporting, research and analysis of the issue. Such comments though aren't legal grounds to influence the FTC, and we have no evidence that they have. It's our observation and analysis only.

John Mackey takes ownership of 'rahodeb' at Yale

During on of his Yale lectures yesterday, a audience member asked John Mackey if he thought his Internet posting as "rahodeb" has played any part in the FTC's aggressive, and expensive to Whole Foods Market, Inc., challenge of the Wild Oats' acquisition.

His answer: "No. Well, I don't know. You'd have to ask the FTC."

Sounds like he at least agrees with 50% of our analysis on the issue.

The Whole Foods' CEO then went on to further answer the question, telling the Yale graduate students, professors and others attending the lecture that he feels he didn't do anything wrong in making the Internet postings about Wild Oats. He commented that it was sort of like a "Warren Buffett opportunity" for him, likening the postings to the witty and insightful comments the billionaire investor and chairman of the Berkshire Hathaway holding company is famous for making each year in the company's annual report to stockholders. [You can read a selection of Warren Buffett's letters to Berkshire Hathaway shareholders at this link: Warren Buffett's Letters to Berkshire Shareholders.]

He then finished up discussing the topic by saying: "I'm actually proud of my postings on Yahoo."

However, he added, the episode taught him a lesson that as the CEO of a major, public company his doing such things could land him on the front page of newspapers. (He really didn't know this simple fact before the postings incident, we wonder?) "I suppose I've kind of grown up. I'm a man now," Mr. Mackey concluded.

Natural~Specialty Foods Memo NSFM) is on the record in the Blog as agreeing with the SEC's decision that John Mackey broke no laws regarding the "rahodeb" posts, as well as writing in a post in May 2008 that we believed the incident should be considered "water under the bridge" post the SEC's decision. A few readers, including a columnist for Conde Naste Portfolio (Felix) took us on a bit on that one. We stick to our original position on the issue and Mr. Mackey. [That post is at this link: Retail Memo: Whole Foods Market CEO John Mackey is 'Back to Blogging'; As Well as Being 'Back in Town.']

But -- did CEO John Mackey, who's been called "Wacky Mackey" at times in the press and elsewhere (a nickname we've always refrained from using and continue to do so accept in pointing out that others have used it), really need to share with the crowd at Yale that he is "proud" of the "rahodeb" Wild Oats' postings at the exact same time Whole Foods' legal counsel is engaged in settlement talks with the FTC. That same outside legal counsel (high-paid lawyers from three different top Washington, D.C. law firms) that, along with the high-priced Washington, D.C. lobbying firm, The Glover Park Group, retained by the company to defend it to Congress and the public against the FTC, is costing Whole Foods' stockholders tons of money at a time when the company's stock share value is at a 52-week low, having dropped in value by about 70% in the last year?

Or as another example, Whole Foods Market, Inc. acquired Wild Oats for $18.50 a share in the summer of 2007 (the $565 million acquisition). At the close of the market today, Whole Foods' stock was trading at $10.36 a share. You can view the details at Yahoo Finance here. We intend no "rahodeb" karma in suggesting readers view the Whole Foods Market, Inc. stock details at Yahoo Finance.

Speaking about interesting karma, in a few of his about 1,400 "rahodeb" Internet postings about Wild Oats Market, Inc. from 1999 -to- 2006, John Mackey wrote about how much Wild Oats' stock was dropping, saying it would fall below $5 a share at one point, as well as suggesting the stock could sink so low the company would have to file for bankruptcy.

We say this without any hubris or glee, but Whole Foods' stock share price only needs to drop by a little over half its current share price to hit that magic under $5 a share value.

And now that 24% of Whole Foods is owned by two investment groups, the private equity firm Leonard Green & Partners (17% stake), and Yuciapia Companies (7% stake), owned by longtime supermarket industry investor Ron Burkle, it's our analysis that if Whole Foods' share price starts dropping much more, it's likely that some type of merger or other similar move led by these two investor groups just might materialize.

Or perhaps Ron Burkle, who owned 18% of Wild Oats and helped engineer the 2007 deal with Whole Foods Market, Inc., might buy up another seven or so percent of Whole Foods, since the current share price is even less than it was when he bought his 7% stake not so many weeks ago.[Suggested reading: Retail Memo: Whole Foods Market, Inc. Closes $425 Sale of Stock to Private Equity Firm; Adds Members of the Firm to its Board of Directors.] [January 16, 2009: Retail Memo - Exclusive: Supermarket Industry Investor Ron Burkle Looking For A Seat On Whole Foods Market's Board of Directors.]

God and Man, and John Mackey, at Yale

The famous Conservative thinker and writer, novelist, host for many years of the PBS public affairs program "Firing Line," master sailor and all around raconteur William F. Buckley Jr., who passed away last year, was a proud graduate of Yale College at Yale University back in the days when a guy could become successful with a mere bachelors degree. While at Yale, Buckley wrote his first book, "God and Man at Yale," (published in 1951), in which he chronicled his undergraduate years at the Ivy League institution of higher learning and set the tone for his long career as a conservative thinker and writer, as well as a polymath.

We wonder, if Whole Foods Market and the FTC fail to reach a settlement before the April 6 start of the FTC Administrative Trial on the merger, and if the conclusion of that trial results in the break-up of the combined Whole Foods-Wild Oats, if John Mackey's first book, published in his 55th (current age) or 56th year of life, might be titled: "God, Did I Have to Say Everything That Came to My Mind at Yale."? But then, there also is a certain charm about Mr. Mackey being himself, even in such times for the company.

Of course, time will tell. And the clock is ticking rather fast until the FTC legal halt ends on March 6. According to our sources, as of Monday afternoon (February 10), the Whole Foods-FTC merger case settlement talks were progressing well. But as always -- stay tuned.