Commentary

Lampert's Hedge Fund Offers $400M For Kenmore Brand

Stressing that “speed and certainty” are critical, Sears CEO Eddie Lampert is offering to buy the storied Kenmore appliance brand through his hedge fund, ESL Investments, for $400 million. He is also proposing to shell out $70 to $80 million for the home improvement arm of the Sears Home Services (SHIP) division.

The offers were made in a letter to Sears’ board, according to a filing yesterday with the U.S. Securities and Exchange Commission, Reuters reports. Lampert had expressed his interest in the brand and SHIP in April, as we report ed

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Yesterday’s formal offer was “written in [Lampert’s] capacity as a hedge fund manager, to an independent committee established by the Sears board [in May] to assess any such deal. Lampert proposed signing the tentative deal and then allowing Sears to shop for a competing offer before closing the deal within 60 to 90 days,” Nathan Bomey writes in USA Today.

“Speed and certainty here are critical. We believe, therefore, that an expedited process is in the best interest of all parties involved,” Lampert maintains.

“The moves are an effort by Mr. Lampert to inject Sears with cash and stave off a bankruptcy filing, while at the same time allowing the hived-off businesses to grow by distributing their products and services beyond Sears and its sister chain Kmart,” sources tell the Wall Street Journal’s Suzanne Kapner.

“The department store operator has struggled with years of shrinking sales and deep losses, forcing the company to close hundreds of Sears and Kmart locations. It has already sold off its Craftsman tool brand to raise cash, and Mr. Lampert’s hedge fund has pumped in money through short-terms loan,” Kapner reminds us.

“Completing the acquisitions of Kenmore and [home-improvement] will enable Sears to improve its debt profile and liquidity position, creating the runway to help continue its transformation,” ESL said in an emailed statement to the WSJ.

Lampert has also spun off the Lands’ End brand and sold more than 200 stores to real estate investment trust Seritage Growth Properties, in which he holds a stake and serves as chairman of the board, the Chicago Tribune’s Lauren Zumbach reminds us. Craftsman was acquired for about $900 million by Stanley Black & Decker in January 2017.

“Lampert’s fund’s initial letter offering to buy certain Sears assets and break up the company also included the Sears Home Services Parts Direct business and certain Sears real estate assets. According to the letter, ESL is still considering Parts Direct and plans to work with outside investors on a real estate deal, but wanted to move ahead with the proposal for Kenmore and the home improvement division,” Zumbach reports.

“The offer for Kenmore is conditional on ESL receiving equity financing from a potential partner, according to the filing. No partner was named,” Ken Martin reports for FOXBusiness.

The company continues to struggle to remain viable. It “reported a net first quarter loss of $424 million, or $3.93 per share, compared with a profit of $245 million, or $2.29 per share, a year earlier. Revenue fell by nearly 31%, mainly due to store closures,” Martin writes.

“Sears has lost $11.2 billion since 2010, its last profitable year. Sales have plunged 60% in that time. There were a total of 3,500 U.S. Kmart and Sears stores when Lampert merged the two brands together in 2005. Now it has fewer than 1,000,” Chris Isidore observes for CNNMoney. He also points out Sears is paying rent on the stores it sold to the real estate investment company also controlled by Lampert. 

“Few people on Wall Street are as polarizing as Eddie Lampert, the billionaire majority shareholder of Sears and Kmart,” begins William D. Cohan’s penetrating Vanity Fair  profile of Lampert earlier this year. “His friends say he is reticent, while his critics find him aloof. His pals talk about his very high standards, while some observers say he is condescending, overly critical, and disengaged. Some people praise his determination and persistence, while others see only inexplicable stubbornness in sticking to failed ideas.” 

The piece concludes with Lampert telling Cohen in an interview: “If I didn’t believe that this company could be transformed still -- the window is definitely shrinking -- but if I didn’t believe that, I would try to take a different path. But I don’t know what that path exactly would be. It’s not a question of giving up or not giving up.”

More and more, in fact, it seems a question of moving on or just pulling the plug on the company that was launched as Sears, Roebuck and Company, a mail-order operation peddling watches and jewelry out of Chicago, in 1893.

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