Marsh goes back on block

The private-equity owners of Marsh Supermarkets Inc. put the company up for sale again in 2009 after stabilizing and returning the home-grown grocery chain to profitability.

Marsh grocery (IBJ File Photo)

Marsh had been losing money, was flirting with default on its debt, and had just dropped to third in Indianapolis market share behind Kroger and Wal-Mart when Florida-based Sun Capital Partners acquired the company in September 2006.

With Sun at the helm, Marsh slashed $70 million in overhead expenses, sold $80 million in real estate, and spun off non-grocery businesses including a caterer, florist and a convenience-store chain.

Marsh used proceeds to pay down debt and plow $60 million into the renovation of dozens of stores. Three years later, Marsh is lean and profitable. It remains third in market share, but the balance sheet looks pristine compared to 2006.

CEO Frank Lazaran told IBJ there was no definitive strategy for selling Marsh, but acknowledged Sun’s plan all along has been to improve the company’s performance and then sell it “when the market is right, financing is right, and someone is willing to pay a fair multiple.”

Retail observers say the most likely buyer this time around is a grocery company or companies interested in operating the stores—not another private-equity player looking to wring “hidden value” out of a troubled company.

That’s because Marsh is no longer troubled, at least financially.



Local tennis tournament sold

Indianapolis Tennis Championships officials said Dec. 4 that they sold the sanctioning rights for the local tournament back to the ATP Tour, and on Dec. 17 officials for the U.S. Tennis Association Southern Section confirmed they bought the sanction and are moving the event to Atlanta.

In recent years, the event had lost RCA as its title sponsor and its network television deal with NBC. The week-long tournament’s attendance declined from almost 100,000 a decade ago to 41,000 in 2009.

Though financial details of the deal were not released, ITC Director Kevin Martin said the revenue from the sale of sanctioning rights to the ATP will be enough to pay all the tournament’s outstanding bills. After the bills are paid, there might be money left over to donate to one of ITC’s charitable causes.

The remaining hard assets of the ITC, which traces its beginnings back to the Woodstock Club in 1920, were to be sold at a garage-sale-style event at the Indianapolis Tennis Center Dec. 21.



Navistar closes local plant

Navistar International closed its Indianapolis diesel-engine plant July 31 after 30 years of supplying Ford Motor Co.

The 1.1-million-square-foot factory and foundry on Brookville Road had been running for generations.

As recently as 2005, Navistar had invested $300 million in plant upgrades and expected to make Ford’s Power Stroke engine through 2012.

Then Navistar and Ford got into a legal dispute over the development of a new engine for the F-150 pickup truck. The two companies finally settled the matter in January 2009 by canceling their contract.

The settlement and loss of business for Navistar affects hundreds of United Auto Workers members in both the engine factory and foundry.

The U.S. Department of Labor said 1,400 current and former Navistar employees—both union-represented and management—would be eligible for benefits under the Trade Adjustment Assistance Act.



Venture firms love ExactTarget

Exact Target (IBJ File Photo)

E-mail marketing firm ExactTarget defied a sour economy and Indianapolis’ status as a technology backwater, raising $145 million from venture-capital firms in just six months.

ExactTarget’s first funding round this year—$69.9 million in May from three venture firms—amounted to the third-largest venture deal in the nation in the second quarter.

The most recent venture win, in November, was $70 million from California-based Technology Crossover Ventures. Its portfolio includes Netflix and Expedia.com.

Nine-year-old ExactTarget sends “permission-based” e-mails to a firm’s existing clients. It has about 500 employees.

In 2008, ExactTarget put an $86 million initial public offering on the shelf as the stock market tumbled.



Indiana stocks surge back

Shares in Indiana-based companies bounced back from a dismal 2008, as an index of the state’s public firms jumped almost 30 percent this year.

Among the top performers were those that took the biggest stock-market beatings in 2008, including Indianapolis-based Emmis Communications Corp., Evansville sporting-goods manufacturer Escalade Inc., and West Lafayette furniture maker Chromcraft Revington Inc. Each company saw its stock jump more than 200 percent on the year after a market swoon in March.

Stock in Indianapolis-based electronics retailer HHGregg Inc. rocketed almost 250 percent, to more than $20, as the company moved quickly to add stores after Circuit City went out of business. Indianapolis-based Steak n Shake Co. saw its shares rise more than 120 percent on the year as new CEO Sardar Biglari found traction for his turnaround plan.

Fellow Indiana-based retailers Finish Line Inc. and Shoe Carnival Inc. also performed well; Finish Line jumped 60 percent, and Shoe Carnival added about 75 percent.

WellPoint notched an annual gain of about 60 percent as worries subsided about the impact of health care reform on the insurance business. Eli Lilly and Co. shares finished where they started the year, at around $35.

Results were mixed for local real estate investment trusts. Simon Property Group Inc. jumped 40 percent, Duke Realty Corp. added 20 percent, and Kite Realty Group Trust fell about 15 percent.

The worst performers were Indiana banks. Muncie-based First Merchants Corp., Greensburg-based Mainsource Financial Group and Evansville-based Integra Bank Corp. each fell more than 70 percent. And shares in Columbus-based Irwin Financial Corp. are trading for about a penny after the Federal Deposit Insurance Corp. took over in September. A banking bright spot was Jasper-based German American Bancorp, which added 50 percent.



IMA loses cushion

Indianapolis Museum of Art (IBJ File Photo)

With an endowment worth more than $300 million, the Indianapolis Museum of Art enjoyed a thick financial cushion until this year.

The endowment lost 26 percent of its value in 2008, falling to $281 million. As markets continued to drop in early 2009, the museum made two separate rounds of budget cuts. CEO Maxwell Anderson delayed the opening of the museum’s Art and Nature Park to 2010 and laid off 21 employees.

Finances did not improve with the fiscal year starting July 1. Donations came in 30 percent short of the first-quarter fund-raising goal, and the museum trimmed $1.1 million from its leaner budget. All 281 full- and part-time employees will be required to take a one-week unpaid leave before June 30.

The IMA’s budget is now down to $23.8 million, compared with more than $28 million in 2007 and 2008.

The IMA will have to overcome its financial hurdles without the help of leading donor Wayne Zink, who resigned from the board in the fall without explanation.

And the budget cuts might not end this year. The 2008 investment loss, coupled with a reduced rate of spending from the endowment, means revenue in the 2011 fiscal year will be reduced about $2 million, officials estimated.

Anderson hopes to make up the lost endowment revenue through special events, a successful fall exhibit and a resurgence in donations.

“I’m working like the devil, like the rest of the staff, to have the best possible result,” he said.



Education funding takes a hit

Call it the year of the revised downward fiscal forecast. The Indiana General Assembly spent its 2009 session dealing with a series of lower revenue projections, each one worse than the last.

The most recent, issued mid-December, projects Indiana will collect $1.8 billion less during this biennium than it expected—and that’s after the May forecast had already dramatically reduced expectations, and after state tax collections came in $475 million under target during the past five months.

Gov. Mitch Daniels met the challenge head-on with a series of major cuts to state spending. Perhaps the most contentious: public school funding. But the governor was stalwart.

“If we do nothing further, we will run through every penny of our reserves and still have $300 million in bills we can’t pay by the end of the budget in 2011,” Daniels said. “We are now forced to our last resort. K-12 spending is half of the entire state budget and will have to contribute something to keeping us in the black.”



Biglari remaking Steak n Shake

Biglari

The young and ambitious CEO of The Steak n Shake Co., Sardar Biglari, launched plans in 2009 to transform the restaurant chain into a mini-Berkshire Hathaway.

Biglari, 32, wrested control of the chain through a proxy fight, then cut administrative costs, halted store expansion and launched promotions such as four meals under $4. The moves helped stabilize sales, and in the spring Steak n Shake snapped a 14-quarter streak of declining same-store sales.

Shortly thereafter, Biglari went public with plans to begin using Steak n Shake as a holding company to acquire businesses “either related or unrelated” to the restaurant business.

And he executed the plan quickly: Steak n Shake in August announced plans to acquire Virginia-based Western Sizzlin Corp.—another firm where Biglari is chairman and CEO—for $39 million.

Then Biglari took a page out of Warren Buffett’s playbook, scoring a roughly 10-percent stake in insurer Freemont Michigan Insuracorp Inc. Wall Street analysts believe his target is the company’s $60 million investment portfolio, which could be used to fund more acquisitions.•