THE ARTIST AND HIS WORK

ELLIOT ZWIEBACH

LOS ANGELES -- What will Ron Burkle do for an encore? That was the question people were asking last week about the apparent architect behind the merger agreement between Kroger Co., Cincinnati, and Fred Meyer Inc., Portland, Ore.

Burkle is the majority owner and managing partner of Yucaipa Cos., a locally based investment firm that has, in less than a decade, forever changed the face of U.S. food retailing.

The Burkle story began simply, with Yucaipa acquiring a series of small chains, then combining them and merging them with ever larger players until it now owns a small piece of the largest American supermarket company.

Burkle was out of town last week and unavailable for comment. However, a spokesman traced Burkle's role in the Kroger-Fred Meyer deal.

"Ron has had a Kroger truck on a shelf in his office for about a year," the spokesman told SN last week, "and everytime he looked at possible strategic acquisitions or potential merger partners, he would look at a map and think of that truck and say a deal with Kroger made the most sense.

"But he felt he needed to complete the mergers between Smith's and then Ralphs with Fred Meyer first. Once that was done, he called Joe Pichler [Kroger's chairman] and began discussing a possible deal.

"Things moved rather quickly after that."

Things always tend to move rather quickly when Burkle puts his mind to it.

He grew up in Yucaipa, Calif., about 60 miles inland from the California coast, near San Bernardino. Supermarketing was the family business, with his father, Joe, working as a district manager and later serving as president of Stater Bros. Markets, Colton, Calif. Burkle worked for Stater as a boxboy and, when he went into the investment business in the late 1980s, he tried to acquire Stater but was unsuccessful.

"I like investing more than anything else," Burkle told SN in 1995, "but supermarkets get into your blood, and I enjoy that business too." Yucaipa started small in 1986, buying Jurgensen's, a small group of old-line grocery stores in southern California that hand-picked and then delivered orders for customers.

Yucaipa sold Jurgensen's in 1987 and used some of the proceeds to acquire Falley's, Topeka, Kan., the Midwest chain often credited with opening the industry's first superwarehouse stores, in the mid-1970s. (Yucaipa also had a four-year investment in Almacs Supermarkets, East Providence, R.I., beginning in 1987 and ending in 1991 when it sold the stores to another investment group.)

Building on its Falley's holdings, Yucaipa undertook acquisitions of some smaller California chains -- Cala Foods and Bell Markets in northern California in 1988 and 1989, respectively; Boys Markets here in 1989; and ABC Markets here in 1990.

A year later, Yucaipa bought Alpha Beta, one of the major operators in southern California. Having already established Food 4 Less warehouse stores locally, Yucaipa merged Food 4 Less, Alpha Beta, ABC, Boys, Bell, Cala and Falley's into a new entity, Food 4 Less Supermarkets, in 1991.

Yucaipa went on to acquire Smitty's, Phoenix, in July 1994; Dominick's, Northlake, Ill., in March 1995; and Ralphs Grocery Co., Compton, Calif., in June 1995. That same year Yucaipa merged Ralphs with Food 4 Less under the Ralphs banner.

In mid-1996, Yucaipa sold the Smitty's stores in Phoenix to Smith's Food & Drug Centers, Salt Lake City, with Burkle gaining a 24% stake in Smith's and becoming its chief executive officer.

In September 1997, Yucaipa sold Smith's to Fred Meyer Inc., followed by the sale of Ralphs to Fred Meyer earlier this year, with Burkle becoming the company's largest single shareholder, with slightly more than 10%, and gaining the title of chairman.

Last week Burkle engineered the sale of Fred Meyer to Kroger, becoming Kroger's largest single shareholder, with a 4% stake. Burkle was also named a director and chairman of Kroger's executive committee.

Gary Giblen, a securities analyst with FAC Equities, New York, said Burkle is "master of the universe in scope and capabilities right now who's gone from regional to national player. Perhaps his next move will be global." Mark Husson, an analyst with Merrill Lynch, New York, compared Burkle to a historical figure from France. "He's the Cardinal Richelieu of Fred Meyer, a shadowy power broker," Husson told SN.

According to Jonathan Ziegler, a San Francisco-based analyst with Salomon Smith Barney, New York, "He'll certainly have less impact at Kroger than at Fred Meyer, but it's obvious he loves this industry, and it's hard to think he would leave it. So what does he do as an encore?"