Bid For Marsh Increases

INDIANAPOLIS-Two firms have submitted a bid to acquire Marsh Supermarkets that is more than $2 per share more than a previous offer made by Sun Capital Partners. Drawbridge Special Opportunities Advisors LLC and Cardinal Paragon are offering just under $13.63 per share, or about $108 million, to buy the chain.

The company's management had already agreed earlier this month to Sun Capital's buyout offer of just under $11.13 per share. Marsh's management is currently making no recommendation on the latest offer.

Last year, Marsh's board of directors created a special committee of independent director and hired Merrill Lynch & Co. to consider strategic alternatives. The committee approved entering into the letter of intent with Sun Capital, but the final transaction will be left up to the company's shareholders. Under the agreement, Marsh had vowed not to solicit alternative transactions before May 11.

Gary Talarico, managing director of Sun Capital, had implied in a released statement that Sun Partners would make little changes with Marsh's management structure. "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," he said.

Marsh operates 69 Marsh supermarkets, 38 LoBill Foods stores, eight O'Malia Food Markets, 154 Village Pantry convenience stores, and two Arthur's Fresh Market stores in Indiana, Illinois and Western Ohio.

Cardinal Paragon, based in Dallas, invests in retail, restaurant, offices and other real estate. The private-equity firm worked with the Great Atlantic & Pacific Tea Co. in 2001 to reduce that grocer's debt through a $200-million asset transaction, as well as a $190-million sale-leaseback deal in 2004. Drawbridge is operated by New York City-based firm Forest Investment Group and acquires undervalued assets in a wide-range of industries.

Boca Raton, FL-based private-equity firm Sun Capital has been a big acquirer of retail companies in recent years. In December it acquired discounter ShopKo and its 255 stores for just under $880 million. It and Lupert-Adler Partners are partial owners of the 250-store Mervyns chain, which they acquired in 2004 with Cerebus Capital Management and Klaff Partners. Besides Mervyns, Sun Capital has stakes in the 250-restaurant Bruegger's Bagels, as well as the 69-unit Rag Shops.