Billionaire Ron Burkle is in talks to buy Tesco Plc (TSCO)’s unprofitable Fresh & Easy chain in the U.S., according to people familiar with the discussions.
Burkle would use the stores to relaunch the Wild Oats brand, according to the people, who asked not to be identified because the process isn’t public. Jim Keyes, the former CEO of 7-Eleven Inc. and Blockbuster Inc., owns the Wild Oats name and will serve as chief executive officer of a new grocery retail venture with the billionaire, said one of the people. Burkle founded private-equity company Yucaipa Cos.
Frank Quintero, a spokesman for Yucaipa, declined to comment. A Tesco official declined to comment.
Tesco fell 0.4 percent to 342.55 pence at the close of trading in London today.
Fresh & Easy marks Tesco’s second failed international venture after it paid to exit Japan last year. The chain, with about 200 shops in Nevada, California and Arizona, hasn’t made a profit since it was built up from scratch in 2007. Tesco invested about 1 billion pounds ($1.6 billion) in the country before deciding the chain, which targeted urban areas with private-label food, was a drain on earnings and management time.
Chief Financial Officer Laurie McIlwee told journalists on June 5 that Tesco was “in advanced discussions with a number of parties interested in taking over Fresh & Easy in its entirety.” The decision to dump the chain cut Tesco’s profit by 1.2 billion pounds in its last fiscal year, leading to the company’s first annual drop in almost 20 years.
Burkle has sought investments and stakes in troubled companies, including a partnership to take over Barneys New York last year. He was also interested in buying part of grocery chain Supervalu Inc. (SVU:US), people familiar with the matter have said. Eden Prairie, Minnesota-based Supervalu sold some of its banners, including Jewel-Osco and Acme, to a Cerberus Capital Management LP-led team in March.
An entity with Yucaipa’s address has applied to open grocery retail stores, according to the trademark application that was published for opposition on May 21. The owner of the filing is listed as Wild Oats Marketing LLC with Yucaipa’s address of 9130 West Sunset Boulevard in Los Angeles.
Whole Foods Market Inc. (WFMI) bought Wild Oats in 2007. At the time, Wild Oats had 109 locations and annual sales of about $1.2 billion, according to a statement from Austin, Texas-based Whole Foods. Wild Oats, which opened its first retail stores in 1987, is planning a comeback to grocery-store shelves, according to the company’s website. This year, it will sell branded cereals, coffee, dry beans, pretzels and other foods at U.S. supermarkets.
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