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Another big investor tells Whole Foods to explore sale

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by: Gary Dinges, American-Statesman Staff

Amid reports that Whole Foods Market could be the target of a takeover bid by supermarket chain Albertsons, another big investor in the Austin-based company is calling on management to consider a sale.

Mutual-fund manager Neuberger Berman, which owns a 2.7 percent stake in Whole Foods, wrote to the company’s board this week calling on it to “immediately engage advisors” to review options — including a sale or joint venture.

The letter from Neuberger Berman was first reported by the Wall Street Journal.

Whole Foods’ shares were up 44 cents, or about 1.2 percent, shortly before 1 p.m. Central time on Thursday.

Neuberger Berman’s call for Whole Foods to consider a sale comes less than a week after reports surfaced from the Financial Times that Albertsons, which operates about 2,200 stores, is considering making a takeover bid for Whole Foods. And it comes less than a month after investment group Jana Partners revealed it had built a 9 percent stake in Whole Foods and raised the possibility of either a management shakeup or even a sale for the company. Whole Foods has a current market value of about $11 billion.

Neuberger and Jana Partners aren’t working together to put pressure on Whole Foods’ leadership, the Wall Street Journal reported, citing people familiar with the matter.

A Whole Foods spokeswoman said the company welcomes shareholder input.

“We remain committed to continuing to take actions to drive shareholder value and position Whole Foods Market for the future,” she told the Wall Street Journal.

In an interview with the Wall Street Journal, Neuberger portfolio managers Charles Kantor and Marc Regenbaum said Whole Foods’ has a valuable brand and a dominant prepared-foods business that set it apart from its rivals. Yet they said the company has fallen behind rivals in adopting new retail technology that could help it increase sales and profit margins.

A number of factors, including intensified competition, have hit Whole Foods hard, leading to struggles in recent quarters. A March report from a Barclays analyst, for instance, suggested Whole Foods had lost 14 million customers since 2015 — many of them to Kroger, which has stepped up its organic offerings.

Kroger has also been rumored to be interested in Whole Foods, according to published reports. So has Florida-based supermarket chain Publix.

Online retail giant Amazon last year considered making a takeover bid for Whole Foods as a way to boost its grocery operation, but decided not to pursue a deal, Bloomberg news service reported last week.

Founded in Austin in 1978, Whole Foods has 462 stores worldwide and 87,000 employees. In its fiscal first quarter, Whole Foods recorded record sales of $4.9 billion, but saw its net income decline and also lowered its earnings projections for the year.

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