(Reuters) - Jana Partners has upped its stake in Whole Foods Market Inc (WFM.O) as the hedge fund looks to shake up the board and senior management of the high-end grocer and push for a sale of the company that has been losing ground in the natural and organic niche it popularized.
Whole Foods' shares, which have lost nearly half their value since early 2015, jumped almost 10 percent to close at $34.17 on Nasdaq.
Jana announced a 8.3 percent stake in Whole Foods in a regulatory filing on Monday, up from the 7.15 percent it held at the end of last month, according to Thomson Reuters data.
The New York-based activist investor, which usually works behind the scenes, is mounting an increasingly public campaign for change at the Austin, Texas-based grocer.
Jana said in its filing that it had started a review of strategic options for Whole Foods in light of the company's "apparent unwillingness to engage in discussions with third parties regarding such alternatives." (bit.ly/2okbH8b)
Like other hedge funds mounting proxy contests, Jana has assembled a group of industry experts it feels can add hands-on knowledge to running the business.
Former Gap Inc (GPS.N) Chief Executive Glenn Murphy, former Harris Teeter Supermarkets CEO Thomas "Tad" Dickson and former Barclays stock analyst Meredith Adler have agreed to be on Jana's slate of nominees, the hedge fund said in its filing.
Jana said it is also working with former Safeway chief marketing officer Diane Dietz and food writer Mark Bittman as consultants.
Murphy bought $44 million worth of Whole Foods stock, while Dickson, Adler, Dietz and Bittman bought smaller amounts of stock, according to Jana's filing.
The filing also disclosed that Jana plans to "internalize grocery distribution and limit the influence of its primary wholesale distribution partner," United Natural Foods Inc (UNFI.O), which in turn relies on Whole Foods for about a third of its sales. United Natural's shares tumbled 8.2 percent to close at $39.47.
Jana, founded by Barry Rosenstein in 2001, oversees $6 billion and has engaged with companies dozens of times. Only once, in the case of Agrium Inc (AGU.TO), has it entered into a full-blown proxy contest.
In its filing, the hedge fund said it wanted to boost Whole Foods' undervalued shares by discussing issues like optimizing its real estate and capital allocation strategies as well as its management analytics and digital capabilities.
Whole Foods has been losing shoppers to rivals as the natural and organic category that it pioneered has gone mainstream via grocery rivals ranging from Kroger Co (KR.N) and Wal-Mart Stores Inc (WMT.N) to newer competitors such as Amazon.com Inc (AMZN.O) and meal kit provider Blue Apron.
Late last year, Whole Foods returned co-founder John Mackey to the role of solo chief executive after six years of splitting the job with co-CEO Walter Robb, who focused on operations, betting that Mackey would be best to lead a turnaround.
Mackey is an outspoken libertarian with a knack for capitalizing on nascent food trends, but he also has courted controversy. For years before the company's purchase of organic food producer Wild Oats, Mackey used the alias "Rahodeb," an anagram of his wife's name, to post comments on web forums praising Whole Foods and criticizing Wild Oats.
Jana announced its plans to push for change long before the company's annual meeting which is not expected to occur until early next year.
Whole Foods in February cut its full-year sales and profit forecasts after posting its sixth straight quarter of same-store sales declines.
In addition to closing stores and centralizing its business, Whole Foods now is working with Dunnhumby, a consumer data subsidiary of Tesco Plc, in a bid to catch up with Kroger and other rivals that already use such information to improve merchandising and personalize offers to loyal customers.
Reporting Svea Herbst-Bayliss in Boston, Lisa Baertlein in Los Angeles and John Benny and Jessica Kuruthu in Bengaluru; Editing by Anil D'Silva and Bill Rigby