Analysts predict Giant Eagle expansion
Giant Eagle’s reputation as an industry innovator could move farther westward should the O’Hara-based grocer pursue Marsh Supermarkets.
Indianapolis-based Marsh announced in late November it had hired Merrill Lynch & Co. “to explore strategic alternatives” including a possible sale. Its stock is down some 30 percent in five years. Calls to Indianapolis for comment were not returned.
It wouldn’t be a stretch for Western Pennsylvania’s dominant grocer to move farther west from its 15-store Columbus and 44-store Cleveland strongholds.
If Giant Eagle sees it can turn around Marsh’s lackluster string of quarterly results — and pay roughly $400 million plus inventory — a deal is possible, according to one analyst.
“It would be a bit of a reach, but Giant Eagle has a history of buying family-owned, broken operations that look too broken to be fixed,” said Burt Flickinger III, managing director of Strategic Resource Group, New York. “Giant Eagle is the best family owner-operator of unionized stores in the country, and Marsh has had some union challenges.”
Flickinger said Giant Eagle has had great success negotiating with its unions, including the Teamsters, meat cutters and bakers because it has managed over the years to add union jobs at its stores.
“Giant Eagle continues to examine opportunities for strategic growth but has nothing to publicly disclose on this matter at this time,” said Giant Eagle spokesman Rob Borella.
“There is a scenario out there that the remaining strong regional chains get bigger by buying other chains,” said Neil Stern, a retail consultant in Chicago with McMillan/Doolittle LLP. “Geographically, they are close enough to do a deal, and Giant Eagle has the resources to do it.”
A public company since 1953, Marsh’s executive roster includes some nine members named Marsh. Many analysts and industry watchers believe the company, like privately held Giant Eagle, still operates like a family-run business.
Industry watchers said Marsh also is caught in the crossfire between Wal-Mart which, as is the case in Western Pennsylvania, is putting a tremendous press on the Midwest with its Supercenters; Meijer, a Grand Rapids, Mich.-based chain of 170 supercenters; and traditional grocer Kroger.
Flickinger said Marsh is highly motivated to do a deal, as every month it waits, the greater the pressure builds on its profit outlook.
Marsh Supermarkets at a glance
Chief executive: Don Marsh, son of founder Ermal Marsh.
Sales: Year ending April 2: $1.7 billion.
Net income: $4.2 million.
Total stores: 279.