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Sears Lives To Fight Another Day

Lampert won the bankruptcy auction, but now what?

Sears has accepted chairman Eddie Lampert’s roughly $5.2 billion bid to buy the retailer out of bankruptcy, sparing the iconic company from liquidation.

But Sears is far from out of the woods.

According to CNBC, Sears had rejected Lampert’s initial $4.6 billion offer through his ESL Investments hedge fund, preferring instead to close the business and sell off its individual parts. But both sides returned to the bargaining table at the insistence of the bankruptcy court judge, and reached an 11th-hour accord that would spare Sears’ remaining 425 stores and 45,000 employees.

See: Sears Marks More Stores For Closure

Under terms of the deal, ESL would acquire substantially all of the company’s assets, Sears said, which includes real estate, the Kenmore appliance brand and its lucrative home delivery and repair businesses.

“We are pleased to have reached a deal that would provide a path for Sears to emerge from the Chapter 11 process,” the retailer’s restructuring committee board members said in a statement. “Importantly, the consummation of the transaction would preserve employment for tens of thousands of associates, as well as the relationships with many vendors and suppliers who provide Sears with goods and services. We would like to thank our dedicated associates, vendors and partners for their continued support through this process, and most importantly the members and customers we have the privilege to serve.”

Related: Sears Bankruptcy ‘Immaterial,’ Majap Vendors Say

The deal still requires approval from the judge, who could be swayed by unsecured creditors favoring liquidation over salvation.

But even if Lampert succeeds in taking Sears out of bankruptcy, the question is: What’s changed? Besides lightening its debt load, the chain would still face the existential challenges that ultimately led to its bankruptcy, including underfunded stores, poor sales and traffic, a less than compelling assortment, and stiff competition from Amazon, Walmart and Target.

“To the extent Sears reorganizes around a much smaller store base, major hurdles to its long-term business will remain,” Moody’s VP Christina Boni told Marketwatch. “Scale, which is critical to competing in retail today, will be lacking and its core customer proposition still remains in question. Sears had been shrinking its store base and reducing costs in recent years but improvement in sales trends and profitability remained elusive.”

Others, including labor activist group Organization United for Respect (OUR), argue that putting Lampert back in charge is a fool’s errand, since it was under his 13-year leadership that Sears ran aground, Marketwatch reported.

Should the unsecured creditors reject Lampert’s bid, the judge would assess the merits of their objections at a Feb. 1 hearing in White Plains, N.Y., CNBC said. Objections notwithstanding, the deal would otherwise close on Feb. 8, according to Sears.