INDIANAPOLIS -- Marsh Supermarkets Inc. on Thursday signed a letter of intent with an affiliate of Sun Capital Partners Inc. for the acquisition of all of the outstanding shares of its common stock for an all-cash price of $11.125 per share. What this will mean to Marsh's various divisions, including the 154-store Village Pantry convenience stores, is an unanswered question.
But industry analysts agree the most likely move by Sun Capital will be to sell the c-stores in the near future. I don't have any particular insights to tell you that the c-stores [image-nocss] would be the first thing on the block to sell, but I have to think intuitively that it would be just because it's probably the most marketable of any of the properties that Marsh has, Mark Heckman, vice president of retail insights for Sorensen Associates, a retailing research company based in Troutdale, Ore., told CSP Daily News.
Heckman is a former director of marketing research for Indianapolis-based Marsh Supermarkets, which has agreed not to negotiate with other persons or solicit alternative transactions prior to Thursday, May 11, 2006. If the company breaches its obligations regarding exclusivity, it will be required to reimburse Sun Capital for its expenses.
The other properties that they have are probably more financially encumbered as well as more encumbered by the mix of underperforming stores and a number of other issues that would make that sell more complicated, Heckman said, noting that Sun Capital realistically could turn around and sell the c-stores within three to six months. He mentioned Canada's Alimentation Couche-Tard as one of several c-store retailers that might show an interest in the chain.
Sun Capital, which is similar to other financial investment companies that are getting into this space, is not really interested in running supermarkets and convenience stores as much as they are in seeing the value of something that is undercapitalized, Heckman said. That allows them to put some capital in short-termand then start to break things apart and resell it to recover their investment and hopefully make a profit.
David J. Livingston of Pewaukee, Wis.-based DJL, a specialist in supermarket research, agreed with Heckman's analysis. He told the Associated Press that Sun Capital likely would spin off the valuable Village Pantry convenience stores and perhaps some individual stores, and then move to sell off the company's real estate. That has been the scenario in similar recent supermarket buyouts, he said.
A Village Pantry spokesperson chose not to make guesses about the future of the company, noting to CSP Daily News only that the Sun Capital deal is very positive for the organization overall, but we are waiting to see [what will happen].
Boca Raton, Fla.-based Sun Capital is a private investment firm specializing in leveraged buyouts of market-leading companies. Its holdings include retailers such as Mervyns, Nationwide Mattress & Furniture Warehouse and Wickes Furniture, along with restaurants, industrial manufacturers and mining companies.
As previously reported in CSP Daily News, last year the board of Marsh Supermarkets created a Special Committee of Independent Directors and engaged Merrill Lynch & Co. to consider strategic alternatives. The Special Committee approved entering into the letter of intent and recommended its approval by the board. The proposed transaction is subject to the successful completion of due diligence by Sun Capital and execution of mutually agreed upon definitive agreements. The closing of the transaction would be subject to approval of the company's shareholders and other customary closing conditions.
Gary Talarico, managing director of Sun Capital, said, We are excited about this opportunity and look forward to moving quickly to conclude a definitive merger agreement with [Marsh]. We are enthusiastic about Marsh's dominance in its core markets and look forward to working with the management team and employees of the company to continue to deliver excellent value to customers and the communities that Marsh serves.
Marsh is a regional chain, operating 69 Marsh supermarkets, 38 LoBill Foods stores, eight O'Malia Food Markets, 154 Village Pantry c-stores and two Arthur's Fresh Market stores in Indiana and western Ohio. The company also operates Crystal Food Services, which provides upscale catering, cafeteria management, office coffee, coffee roasting, vending and concessions, and restaurant management and Primo Banquet Catering and Conference Centers; Floral Fashions, McNamara Florist and EnfloraFlowers for Business.
In February, the company's 10-member board voted to remove Don Marsh's son, David Marsh, as the chain's president and replace him with his uncle, William Marsh. Three other Marsh family members also were fired from their executive positions.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.