Two Ohio grocers agree to buy 26 Marsh stores for $24M

Two Ohio-based grocery chains have agreed to buy 26 of Marsh Supermarkets’ 44 remaining stores for a total of $24 million, according to a bankruptcy court document.

Fishers-based Marsh is selling off the stores after closing 19 in May and filing to reorganize under the protection of bankruptcy.

The court filing, posted early Tuesday afternoon, says Kroger Co. entity Topvalco Inc. plans to spend $16 million to acquire 11 Marsh stores, and Fresh Encounter entity Generative Growth II LLC plans to spend $8 million to buy 15 stores.

Click here for the full list of stores slated for purchase.

Cincinnati-based Kroger, with 2,800 locations nationwide, already has a huge presence in the Indianapolis area. In 2015, the company announced a wide-ranging plan to beef up its operations in central Indiana, including creating or remodeling dozens of stores, establishing a regional training center, and creating an estimated 3,440 jobs.  

Findlay, Ohio-based Fresh Encounter Inc. operates 21 groceries under the store names Community Markets, Great Scott Community Markets, Sack ‘N Save Supermarket and Chief.  

Fresh Encounter is on a growth spree of late. In February, it purchased family-run Remke Markets. Remke, based in Erlanger, Kentucky, operated 10 stores in the Cincinnati area.

Under the various banners, Fresh Encounter operates stores throughout Ohio and eastern Indiana.

Marsh accepted bids on its 44 remaining stores through an auction that convened on Monday. The company called managers of the remaining stores to its headquarters for a 12:30 p.m. meeting Tuesday, where executives informed them of the results of the auction.

Officials with Kroger and Fresh Encounter were not immediately available for comment.

The sales, which require bankruptcy court approval, must overcome the objection of Rhode Island-based CVS Health.

The pharmacy chain in April acquired Marsh’s pharmacy accounts and inventory for $38 million. As a condition of the purchase, CVS negotiated that the 37 stores where Marsh operated pharmacies be precluded from operating pharmacies for five years, according to a bankruptcy court filing last week by the pharmacy giant.

According to the court filing by Marsh on Tuesday, “the purchasers are only willing to proceed with the sale transactions if this use restriction is removed.”

Marsh contends that the CVS agreement only bars Marsh itself from operating pharmacies at the locations. Further, it asserts that even if the condition does apply to buyers, the language “is unenforceable under the bankruptcy code.”

Marsh operated 116 groceries and 154 convenience stores at the time of its sale in 2006 to Sun Capital Partners. The Florida-based private-equity firm bought Marsh for $88 million in cash and the assumption of $237 million in debt.  

Once a homegrown powerhouse, Marsh at the time of the sale was beginning to lose market share to national chains ramping up their grocery business. The bleeding only got worse, with specialty grocers such as Whole Foods and The Fresh Market entering central Indiana, and Kroger investing millions to expand.

In a bankruptcy court filing, Marsh acknowledged its lack of investment, saying it spent just $15 million in the past two years on store remodels while Kroger and Meijer invested a total of more than $100 million.

“While these stores outperformed total chain results, they did not achieve the sales lift that the debtors were anticipating,” the company said. “Further, openings from several of the debtors’ competitors resulted in double-digit declining same-store sales. As a result, the debtors began facing liquidity challenges.”

The sale of the remaining Marsh stores will end an 86-year run for the company. Ermal Marsh opened his first grocery in 1931, in Muncie. By 1953, Marsh operated 16 stores and went public. Six years later, Ermal Marsh died in a plane crash near Logansport; his brother Estel succeeded him as CEO.

In 1968, Don Marsh, Ermal’s 30-year-old son, was appointed to lead the company and would retain the CEO’s title until 2006, when Sun closed on the purchase and dismissed him.

Sun quietly sold controlling interest in Marsh to Delaware-based JT Grocery Consulting LLC on March 24, the same day it formed. The buyer acquired “25 percent of the economic rights and all of the voting and control rights,” bankruptcy papers show.