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Firm that acquired Marsh Supermarkets says grocer poised for growth
(Indianapolis Star, The (KRT) Via Thomson Dialog NewsEdge) Sep. 23--Frank Lazaran has one message for loyal Marsh Supermarkets customers accustomed to fresh produce, friendly store clerks and their Fresh Idea discount cards.
"Marsh is here to stay," said Lazaran, Marsh's chief executive and president, in a recent interview at the 96th Street store. "All of this uncertainty is behind us."
In fact, the once-struggling grocery store chain is poised to grow and add stores, he said.
Uncertainty was rampant a year ago when Boca Raton, Fla.- based Sun Capital Partners completed its $325 million acquisition of Marsh.
After 75 years of running a family-owned supermarket, the Marsh family let go of the grocery chain that had been its legacy. Same-store sales had dipped for three straight years, and the stock price had plummeted.
A lot has happened in 12 months. Thirteen stores have closed. Corporate jobs have been cut. Divisions have been sold. But the core of the business -- the grocery store -- has remained a major focus.
"The next stage is growth," said Lazaran. "We want to grow new store sites and make minor acquisitions."
New Marsh stores are on the radar for Lazaran, and he says Sun Capital is on board. He wouldn't reveal specific locations or say how many new stores are in the works.
"Sun has made it very clear. We have capital, and we will help you grow the business," said Lazaran. "Those are magical words."
And words of relief to customers. Many wondered whether their hometown grocer would still exist a year after Sun took over. Sun, a private-equity firm, specializes in buying underperforming companies and working to turn them profitable. In many cases, it then sells.
Sun, however, is willing to hold on to companies that continue to make a profit. Its portfolio includes many companies it has owned for several years. Take Catalina Lighting, a designer and manufacturer of residential and office lighting products based in Miami. Sun purchased it in 2001. A year later, it bought Wickes Furniture, a 44-store chain in Illinois that it still owns.
"I think everybody has just kind of been waiting to determine if they are going to go ahead as they have with other companies and begin to (sell) them," said Joe Lackey, president of the Indiana Grocery and Convenience Store Association.
Tiffany Miller was one of those wondering.
"A year ago, I had no clue if Marsh would still even be here. No one knows when some out- of-state company gobbles you up," said Miller, a mother of four, who was shopping at the 116th Street Marsh store Wednesday. "Today, I can tell you that, if anything, this grocery store has gotten better."
Lazaran likes to think so.
He points to small touches like the shiitake mushrooms stocked next to more than a dozen other varieties in the 96th Street store. It's a tiny but important focus the company has taken on: to be the place to go for mushrooms.
"Let me tell you some of these are hard to get in 365 days a year," said Bill Erickson, district supervisor.
Lazaran also points to bigger changes, like the rebranding of stores as Marsh Hometown Markets or Marsh The Marketplace. The name changes come along with refreshed and remodeled stores, including an Indiana University motif in a Bloomington store and a Ball State University theme unveiled Thursday in the Muncie store on McGalliard Road.
Since the acquisition, 33 stores have been remodeled. By March, Lazaran said 65 will have been revamped.
It has been a year of research and study of the chain's 103 stores. Does a full-service meat counter make sense in this store? Should seafood be self-serve rather than a service department? How deep should the wine racks be?
"We are going to continue to look at costs and freeing up capital, but we are ready to move forward," Lazaran said. "We had some tough decisions early on, closing stores, cutting jobs. But we also had to look out for our other 10,000 associates."
Less than a month after taking over the struggling supermarket chain, Sun closed 16 stores -- one Marsh store, seven LoBill Foods, two O'Malia's Food Markets, two Arthur's Fresh Markets and four Village Pantries. It also laid off 10 percent of the staff at its Fishers headquarters.
Experts viewed the moves as a sign the company was trying to find its niche. Marsh, in recent years, had struggled as it was squeezed by big-box discounters like Wal-Mart and specialty stores like Wild Oats.
Then in November, Toronto-based H&R Real Estate Investment Trust paid $88 million for eight of Marsh's best-performing Indiana locations. In June, the McNamara Florist division of Marsh was sold to the division's president, Toomie Farris.
Village Pantry, still owned by Sun, is no longer under Lazaran's watch. Its vice president now reports directly to Sun management.
All of these moves are typical of Sun, which has extensive expertise in deconsolidating companies and then selling, said Matthew Will, associate dean at the School of Business at the University of Indianapolis.
"It's Finance 101. Cut the money-losing units and invest in the successful units," he said.
Once that's done, it's a question mark as to what will happen next.
"Sun has a mixture of holding onto companies long-term or flipping them and selling them," Will said. "Is this going to be a long-term hold, or is this going to be a flip?"
Lazaran wouldn't specifically address the possibility of a sale, reiterating that the grocer is here to stay and that Sun seems to be looking long-term. He points to the stores that have been remodeled.
"The results from the conversions are exceeding our expectations," he said.
It's possible Sun could hold onto Marsh for 10 years or longer, Will said. "It is definitely not an absolute that they will sell anytime soon. If a company is profitable, they will milk it for all it's worth."
Roderick Sapper was glad to hear that as he loaded his car with groceries in Fishers.
"I'll tell you what, I can't find any other store around here that has the kind of meat that this store has," he said. "I will be devastated if we have to go through another sale."
Don Marsh, who led the company for 40 years, was emotional at the time of the sale. He didn't want customers to feel they were losing their hometown grocer. He and other members of the family were not available for comment for this story.
Lazaran said he spoke frequently with Don Marsh in the early stages of the acquisition but has had no contact with the Marsh family since.
But as the company moves forward, shoppers likely will see much of what they've seen from the Marsh family for 75 years and what has made them loyal.
"Marsh had a very good reputation prior to the acquisition, and we want to build on that," Lazaran said. "We've still got work to do but we're here to get it done."
RECENT HISTORY:
--November 2005: Marsh announces it is exploring a possible sale.
--February 2006: The company announces it has cut 25 jobs at its headquarters, including those of President David A. Marsh and three other top executives. William L. Marsh, Don's brother, is made interim president.
--April 2006: Marsh says it has agreed to be purchased by an affiliate of Florida- based Sun Capital Partners.
--September 2006: Marsh shareholders vote to approve the company's acquisition by an affiliate of Sun Capital.
--October 2006: Marsh announces the closing of 16 stores -- one Marsh, seven LoBill Foods, two O'Malia's Food Markets, two Arthur's Fresh Markets and four Village Pantries. It lays off 10 percent of the headquarters staff.
--November 2006: Toronto-based H&R Real Estate Investment Trust buys eight of Marsh's best- performing Indiana stores and will lease them back to the company.
--April 2007: Marsh announces it will bring back the Marsh name to some LoBill stores. The company eliminates the full-service meat counters at two of its stores and the floral shop in Shelbyville.
--September 2007: Marsh announces that its stores will be rebranded as Marsh Hometown Market or Marsh The Marketplace.
MARSH SUPERMARKETS:
--Headquarters: 9800 Crosspoint Blvd., Indianapolis.
--Stores: Operates 103 grocery stores.
--Other operations: Crystal Food Services, Primo Banquet Catering and Conference Centers, several other food- related companies.
--Chief executive: Frank Lazaran.
--Employees: Nearly 11,000.
SUN CAPITAL PARTNERS:
--Description: A private investment firm focused on leveraged buyouts, equity, debt and other investments.
--Headquarters: Boca Raton, Fla.
--Chief executives: Rodger R. Krouse and Marc J. Leder.
--Portfolio: A sample of affiliated companies includes American Benefit Plan Administration, Boston Market Corp., Bruegger's Enterprises, Garden Fresh, Life Uniform, LOUD Technologies and Wickes Furniture.
SOURCE: Sun Capital Partners, Marsh Supermarkets, Star archives
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