NEW YORK (Reuters) - The board overhaul announced by Whole Foods Markets Inc on Wednesday has failed to satisfy Jana Partners, according to a person familiar with the matter, signaling that the month-long battle between the organic grocer and activist hedge fund is no nearer to a conclusion.Jana, which owns 8.3 percent of the company, is worried about the lack of grocery experience among the five new directors the company appointed on Wednesday, the person said, as well as their arrival after, rather than before, the company's introduction of a new operational plan.Whole Foods' new directors include the former chief executive of sports retailer Foot Locker, the former CFO of electronics chain Best Buy and the founder of Panera Bread. The company did not appoint any directors that Jana proposed last month.While the hedge fund appreciates the board overhaul and the operating experience of the new directors, Jana wants more directors on the board with grocery industry experience, like that of current board member, Walter Robb, according to the person familiar with the matter.Jana declined to comment on the new Whole Foods board and operational plan. Whole Foods' new board chair, Gabrielle Sulzberger, praised the operating and retail experience of the new directors during the company's earnings call on Wednesday. Sulzberger noted that the new board now has four women and nine former CEOs or CFOs. "These new directors are value creators and recognized leaders in their respective areas of expertise," Sulzberger said.Whole Foods shares were up 2.6 percent at $37.21 in afternoon trading. In an analyst note, Credit Suisse said: "We see the moves as a step in the right direction, but were disappointed by the lack of food retail experience among the new board members." Credit Suisse rates the stock an outperform. JPMorgan, which has a neutral weighting on the stock, noted the company's new set of ambitious goals and said the key will be whether Whole Foods can accomplish them."Whole Foods made numerous intelligent moves yesterday – the key now will be execution," the bank said in a research note.Corporate battles with activists often end in a settlement, where the company works with the investor to add new blood to the board in exchange for the hedge fund keeping quiet for at least a year.That was not the case with Whole Foods' announcement, meaning Jana can still pressure the company openly and can nominate its four previously identified director candidates at next year's annual meeting. Whole Foods said on its Wednesday call that it offered to appoint two of Jana’s nominees for the board, but the hedge fund balked at the offer. "Presumably, one option involves agitating for a sale if the company's value enhancement plan shows even a hint of sputtering," said Don Bilson, head of event-driven research at Gordon Haskett. (Reporting by Michael Flaherty; editing by Bill Rigby)
