NEW YORK — Vornado Realty Trust might be lining up a behemoth of a partner in its potential bid for Sears — none other than Target Corp.
While sources from the real estate and financial communities said Vornado has held preliminary talks with everyone from Wal-Mart Stores to private equity group Cerberus about joining a bid for Sears, the favorite now is believed to be Target. The Minneapolis-based discount chain has made no secret of its eagerness to get its hands on more real estate as it attempts to keep up with the Wal-Mart juggernaut.
As reported in WWD Monday, Vornado is eyeing a last-minute bid for the struggling Sears that would top Kmart’s $11 billion offer. The Kmart bid, led by hedge fund wizard Edward Lampert, is due to close in mid-March and time is running out for Vornado to make a counteroffer.
As a result, the success of a competing bid at this stage appears uncertain. There are questions ranging from the structure of the deal to the purchase price, and even issues regarding how viable Sears’ stores would be for Target. There are also rumblings about whether sufficient time exists to pull together financing for a competing bid. But some sources speculated late last week that the bidding for Sears eventually could top $12 billion.
“I think the Kmart-Sears merger will go forward,” said a retail source. “It’s not in the company’s [Target’s] DNA. It’s a great opportunity, but it would surprise me if Target went after Sears.”
Yet real estate sources on Monday reiterated their positions about how one shouldn’t discount Steve Roth, chief executive of Vornado. One contact said, “Never underestimate Roth. He has strong access to capital.”
And while partnering with Vornado is a move that would be contrary to the typical Target maneuver, a real estate source said: “Forget about what these companies used to do. Ever since Jones Apparel Group bought Barneys New York, all these firms are thinking outside the box and analyzing strategies that they wouldn’t have considered before.”
Several hedge funds that said they were maintaining their positions in Sears stock are betting that Vornado makes a move soon. Of course, they favor any competitor for a Sears play since the shares of Sears are likely to increase in value should that bid come to fruition.
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