Billionaire buys 9.2 percent of Wild Oats

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Wild Oats got another big boost to its stock price Thursday after a Los Angeles billionaire purchased a 9.2 percent stake.<

Wild Oats got another big boost to its stock price Thursday after a Los Angeles billionaire purchased a 9.2 percent stake.


Ron Burkle, a grocery industry investor, bought 2.6 million shares of the Boulder natural products grocer for about $11.2 million, according to a filing made Wednesday with the Securities and Exchange Commission.


He made the purchase through his investment group, Yucaipa Cos. In the filing, Yucaipa said it made the purchase because it believes the shares are undervalued.


Yucaipa also said Wild Oats should enjoy substantial growth because "recent developments in the supermarket and general retail sectors are likely to create attractive opportunities for the company to acquire new stores and expand into new geographic locations."


Yucaipa contacted members of Wild Oats' board of directors to discuss shareholder concerns and "may contact the company's board or management again from time to time to discuss such concerns," it added.


Sonja Tuitele, a Wild Oats spokeswoman, said the statements are typical.


"It's like any other large investor," she said. "They want to meet with management, get updates with our business objectives."


Tuitele said she did not know what, if any, affect Burkle's stock purchase will have on the company, which reported a loss of $7.1 million, or 25 cents per share, for 2004.


"But with Ron Burkle's deep knowledge within the grocery industry ... this is a strong endorsement of Wild Oats," she said.


Forbes Magazine ranks Burkle, who has a net worth of about $2.3 billion, as the 272nd richest person in the world. The magazine also said Burkle made his fortune with leveraged buyouts of supermarket chains Fred Meyer, Jurgensen's and Ralph's.


Shares of Wild Oats (Nasdaq: OATS) jumped $1.34, or nearly 15 percent, on Thursday to close at $10.61. Also Thursday, Pathmark Stores Inc. announced that Yucaipa invested $150 million in that regional supermarket chain, which has 142 stores in the New York, New Jersey and Philadelphia areas. Its stock soared more than 32 percent on the news.


Wild Oats' stock has now jumped nearly $4 since the beginning of last week, presumably due to Yucaipa's investment and upgrades by Prudential and Key Banc Capital Markets.


Tuitele said the positive boosts by analysts could be attributed to Wild Oats recent fourth-quarter and full-year earnings call, when company executives noted top-line growth and better-than-expected comparable store sales. During the call, the company also said its 2004 troubles -- caused by a distribution switch-over and increased marketing by conventional stores after the Southern California grocery strikes -- have nearly abated. "What caused our woes in 2004 are largely behind us," she said.


Rob Wilson, who follows Wild Oats for a San Francisco equity research company, said a rough 2004 has put the grocer in an equally tough position for this year.


"They're positioned miserably for 2005," said Wilson, president of Tiburon Research Group Inc. "But that being said, I feel like this is a management team that recognizes they have their backs against the wall, and they're making some changes that will hopefully positively impact the business model."


The changes include a broadening of merchandise, increased advertising, and a continued roll-out of its private label products, Wilson said in a Feb. 24 research note. In that note, Tiburon raised its 12-month outlook to "buy" and forecasted a full-year earnings per share of 8 cents for the grocer.


Wilson declined to speculate on Burkle's investment in the company.


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