Swapping his chairman/CEO hat for his chief investor role, Sears’ Eddie Lampert, through his hedge fund ESL Investments, has offered to buy the retailer’s iconic Kenmore appliance brand, all of its real estate, and two units of its home services division.
The proposals, submitted by letter to Sears’ board last Friday, are intended to preserve the dwindling value of the Sears properties, reduce the company’s debt, improve its liquidity, and free it up to pursue Lampert’s “asset-light” web-centric retail strategy.
“The portfolio of Sears’ assets has substantial value that is not being reflected in the capital markets or being maximized under the current organizational structure,” observed ESL. The hedge fund is Sears’ second-largest shareholder after Lampert himself.
ESL acknowledged that Sears has failed in its two-year-long effort to find a buyer for Kenmore, and said it is prepared to submit an acquisition proposal and close on a deal within three months.
It is unclear how or if a change in ownership would affect Sears’ Kenmore distribution deal with Amazon, which began selling the brand nationwide last quarter.
ESL also offered to buy all of the remaining real estate on Sears’ books, assume the $1.2 billion in debt obligations that use the stores as collateral, and would lease back some or all of the stores to the chain.
In addition, ESL said it would take the Parts Direct and home improvement businesses of Sears’ Home Services division off the retailer’s hands for $500 million in cash.
The hedge fund said that Lampert and Kunal Kamlani, its president and a Sears director, would be removed from any negotiations, and that ESL’s top priority is to see the properties divested at a fair value, whether to themselves or other buyers, to “avoid any deterioration in the value of such assets.”
Sears’ board said it will review and consider ESL’s proposals, which follow another vexing fourth quarter for the company, in which revenue fell 28 percent and same-store sales declined nearly 16 percent.
Shares of Sears Holdings shot up 4 percent in early morning trading on news of Lampert’s offers.