The funds control about 5% of the retailer, The Wall Street Journal reported.
The funds have been preparing an effort to replace all 12 members of the retailer's board, according to the report, which cited people familiar with the matter. The group also wants the company to replace CEO Steven Temares, who has led the company since 2003, and better align compensation with performance, the Journal reported.
Shares of Bed Bath & Beyond jumped 24.7% on Tuesday to $17.30.
The Journal identified the funds as Legion Partners Asset Management LLC, Macellum Advisors GP LLC and Ancora Advisors LLC.
Bed Bath & Beyond's revenue is expected by analysts to fall 10.2% to $3.3 billion when it reports quarterly results on April 10. The company is expected to post earnings of $1.12 a share. A year earlier, Bed Bath & Beyond earned $1.48 a share on sales of $3.7 billion.
Analyst Bobby Griffin at Raymond James upgraded the stock to strong buy from outperform. The analyst put a $20 price target on the stock.
Griffin wrote that "within the foreseeable future, Bed Bath & Beyond may either no longer be a public company" or go private.
Bed Bath & Beyond said in a statement Tuesday that it "regularly engages with our shareholders and welcomes constructive input focused on enhancing value. Members of our board of directors and senior management team have met with and held several discussions with Legion and Macellum over the past few weeks. Ancora has not previously reached out to or engaged with the company.
"In these conversations, we made clear our commitment to engaging constructively and acting in the best interest of all Bed Bath & Beyond shareholders. We asked on several occasions for their suggestions and ideas for improving the company's business but they did not provide any. We also invited them to participate in the board refreshment program we have been undertaking in recent years and are in the process of accelerating with investor input. Instead they chose to publicly attack the company and provide their intent to nominate directors to take over the full board. Unfortunately, while our directors and management were seeking to engage in good faith, it appears that the Legion and Macellum representatives were merely seeking information to support their attack," the company added.
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