Sears chair of­fers to ac­quire com­pany

He says bid would keep 50,000 peo­ple work­ing

USA TODAY US Edition - - USA TODAY MONEY - Nathan Bomey

The chair­man and largest in­vestor in Sears Hold­ings is of­fer­ing to buy the re­tailer out of bank­ruptcy in what may amount to the chain’s last hope to sur­vive its pre­cip­i­tous de­cline.

Sears chair­man and hedge fund in­vestor Ed­die Lam­pert, who also was CEO un­til the re­tailer’s Oc­to­ber bank­ruptcy fil­ing, dis­closed the of­fer Thurs­day.

“Our pro­posed busi­ness plan en­vis­ages sig­nif­i­cant strate­gic ini­tia­tives and in­vest­ments in a right­sized net­work of large for­mat and small re­tail stores, dig­i­tal as­sets and in­ter­de­pen­dent op­er­at­ing busi­nesses.”

Lam­pert said the ac­qui­si­tion would keep 50,000 Sears em­ploy­ees work­ing.

He said the deal would in­clude 500 stores, which cov­ers essen­tially all of the lo­ca­tions Sears has not iden­ti­fied for clo­sure. The deal would in­clude Sears and Kmart stores.

It also would in­clude the Ken­more ap­pli­ance and DieHard tool brands, key real es­tate and the com­pany’s in­ven­tory and re­ceiv­ables.

Lam­pert de­scribed his of­fer as worth about $4.6 bil­lion “in to­tal con­sid­er­a­tion.” He said the price would in­clude debt to be is­sued by Sears, “a credit bid” of about $1.8 bil­lion and the as­sump­tion of cer­tain li­a­bil­i­ties.

In re­cent years, Lam­pert’s hedge fund, ESL In­vest­ments, has loaned Sears more than $2.4 bil­lion in fi­nanc­ing. So he could lose a for­tune if Sears is forced to liq­ui­date or sticks cred­i­tors with steep losses.

But crit­ics also have ac­cused him of struc­tur­ing his deals to en­sure he gains ac­cess to key as­sets in the event of the re­tailer’s demise. He was earn­ing hun­dreds of mil­lions an­nu­ally in Sears debt pay­ments be­fore the re­tailer’s bank­ruptcy.

A com­mit­tee or­ga­nized to rep­re­sent Sears’ un­se­cured cred­i­tors in the case filed a mo­tion ac­cus­ing ESL of po­ten­tially struc­tur­ing deals to ben­e­fit it­self. ESL, which is wholly owned by Lam­pert, has de­nied those ac­cu­sa­tions, say­ing it should be cred­ited for prop­ping up Sears in re­cent years.

In his let­ter propos­ing the deal, Lam­pert also noted that his bid was con­di­tioned on re­leas­ing ESL “from any li­a­bil­ity re­lated to any” deals that the hedge fund en­gi­neered be­fore the bank­ruptcy.

In one key deal that’s un­der scru­tiny, Lam­pert helped en­gi­neer a spinoff of 235 of the most valu­able Sears prop­er­ties to a real es­tate in­vest­ment trust called Ser­itage Growth Prop­er­ties. That 2015 deal gen­er­ated $2.7 bil­lion for Sears.

As of Sept. 30, Ser­itage still had 102 Sears leases, cov­er­ing 12.4 mil­lion square feet and $61.2 mil­lion in an­nual base rent.

Since Au­gust, the re­tailer has closed or an­nounced plans to close about 228 stores.

Sears has suf­fered from the rise of Ama­zon, pow­er­ful re­tail­ers like Wal­mart and Tar­get, a lack of in­vest­ment in its stores, and le­gacy costs, in­clud­ing pen­sions.

The com­pany filed for Chap­ter 11 bank­ruptcy pro­tec­tion on Oct. 15.

SEARS HOLD­INGS

Sears Hold­ings Chair­man Ed­die Lam­pert

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