Real Estate & Retail

Marsh puts itself up for sale:

December 26, 2005

Locally based Marsh Supermarkets Inc. closed out perhaps the most disappointing year in its nearly 75-year history by hanging a for-sale sign on its front door.

The announcement came Nov. 29, the same day the grocer reported another disappointing quarter-this time a $3.4 million loss on revenue of $549.6 million. Marsh said it had hired Merrill Lynch to explore alternatives, including a sale, but otherwise said little.

Increasing competition from large-format retailers such as Wal-Mart is partly to blame for Marsh's woes, experts said. The Arkansasbased titan has grown its local grocery market share from 2 percent to 23 percent in five years, according to Morningstar Inc.

Some analysts said Marsh also overextended itself by opening fancy stores in new locales, such as the Chicago suburb of Naperville, Ill., rather than using scarce cash to remodel stores in its core central Indiana market.

A number of scenarios could unfold for Marsh.

A regional grocer, such as California's Safeway Inc., could snatch up the company to gain a presence here. (That firm has no affiliation with the locally based, seven-store Safeway chain).

Marsh has a market value of $76.6 million, based on the Dec. 14 trading price of its Class A and Class B shares. But any buyer of the entire company also would be saddled with its $200 million debt.

Private equity firms these days are buying up everything from doughnut chains to telecom com panies, but they might hesitate to make an aggressive run at Marsh because of that debt. The fact that Marsh already has sold much of its real estate also could cool private equity interest.

That's why some analysts think Marsh could be broken up, with the company's 160 Village Pantry convenience stores sold separately from the 70 Marsh Supermarkets.

If the company can't seal deals with suitors, though, a Chapter 11 filing could be in the offing.

Earlier this fall, IBJ was first to report the company had shelved its plan to develop the former Atlas grocery site it owns at 54th Street and College Avenue.

In May, Marsh settled a federal lawsuit with former executive C. Alan Marsh, brother of CEO Don Marsh, by forking over more than $1.5 million in unpaid benefits.

Marsh is the sixth-largest employer in Indiana with 14,900 employees. In addition to Marsh and Village Pantry stores, it operates 38 LoBill Foods.


Angie Meyer of Indianapolis loads groceries at the Speedway Marsh store.
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