NEW YORK — Target Corp. and Vornado Realty Trust have abandoned talks about a joint bid to buy Sears, Roebuck & Co., people familiar with the matter said.
Target, based in Minneapolis, pulled the plug on a potential bid after deciding that the complexities of such a deal would have been too difficult to structure properly. One issue was said to have centered on how to value a certain key real estate site that Target wanted against the backdrop of two possible counteroffers.
Wall Street experts said Vornado had contacted Target about a possible joint bid, and Vornado was planning on the help of another real estate investment trust. Hedge fund managers said they had an inkling last week that Target was probably not interested in operating Sears, and that the discounter’s consideration of a joint bid was centered solely on obtaining certain store locations. Since REITs can’t operate corporate businesses, such a scenario would mean a successful bid would have likely resulted in the Sears nameplate going by the wayside.
Now that Target has walked, investment firms that hold positions in Sears’ stock said on condition of anonymity that they anticipate the announced Kmart Holding Corp.’s $11 billion acquisition of Sears to conclude without another bidder stepping forward. The deal is anticipated to close in mid-March
That doesn’t mean Vornado is out of the picture completely. Real estate professionals said Vornado is keeping tabs on certain sites in case the soon-to-be formed Sears Holdings Corp. chooses to close the locations that Vornado wants for its real estate portfolio. Vornado’s holdings include 55 shopping centers in six states and Puerto Rico that total about 11.3 million square feet; 33.1 percent of the outstanding common stock of Alexander’s; the Hotel Pennsylvania in New York, and eight Kmarts, including the only two locations in Manhattan.
Officials at Target and Vornado did not return phone calls seeking comment.
This story first appeared in the February 24, 2005 issue of WWD. Subscribe Today.