Kmart chairman Edward Lampert listens during a news conference to announce the merger of Kmart and Sears in New York , 2004.

Just what exactly is Edward S. Lampert’s end game?

While many believe the Sears and Kmart nameplates lost relevance long ago and have watched their slow march toward oblivion, Lampert through his hedge fund ESL Investments on Thursday did what many observers expected of him: He bid — offering $4.6 billion to be precise — for bankrupt Sears Holdings Corp. through his hedge fund ESL Investments. Lampert has plenty of reasons not to walk away from Sears: He’s the retailer’s largest shareholder and debt holder, not to mention its chairman.

As he has throughout the 13-year-long saga of Sears Holdings, Lampert remained almost the only person bullish about the retailer’s prospects should his bid succeed. “ESL Investments continues to believe in Sears Holdings’ immense potential to evolve and operate profitably as a going concern with a new capitalization or organizational structure. We believe that a future for Sears as a going concern is the only way to preserve tens of thousands of jobs and bring continued economic benefits to the many communities across the United States that are touched by Sears and Kmart stores.”

ESL also outlined an oft-repeated yet never implemented promise, saying that it “envisages significant strategic initiatives and investments in a right-sized network of large format and small retail stores, digital assets and interdependent operating businesses.”

The Lampert bid is simply the latest Sears Holdings bullet point, and yet another Gordian Knot of maneuvers involving the billionaire. If his bid succeeds, it will be the second time Lampert will have acquired Sears and its sister company Kmart — and this time he’s buying them from himself.

It was Lampert who, through ESL, bailed Kmart Corp. out of bankruptcy in 2003 and a year later masterminded the merger of Kmart Holding Corp. with what was then known as Sears, Roebuck & Co. The merger was finalized in 2005.

Presuming there are no other going-concern bidders — since who else would want to cough up $4.6 billion, and not have the benefit of converting debt to equity, for an ailing retailer that seems caught in a time warp? — the real question is what Lampert hopes to gain by preserving his Sears investment. While the remaining assets and real estate holdings could help the retail operation limp along for several more years, one can’t help but wonder if Sears eventually ends up in a pseudo-liquidation mode anyway through a continued steady sale of assets — only this time as a private company and outside of Wall Street’s scrutiny.

Shares of Sears, which now trades over-the-counter, rose 2.9 percent to 27 cents following disclosure of Lampert’s bid.

But the bid comes with some conditions, and it may not pass muster with Sears’ unsecured creditors committee. The committee already has said the retailer might be better off in liquidation mode. Some think the sum of its parts at a bankruptcy auction may bring in more value, and consequently a higher return to creditors, than selling the company as a going concern, even if the latter would, as ESL claims, save 50,000 jobs.

ESL disclosed its offer amount and terms in a regulatory filing with the Securities and Exchange Commission. The filing incorporates ESL’s non-binding letter of intent dated Dec. 5 that was sent to Lazard Frères & Co., Sears’ financial adviser.

Sears filed its voluntary Chapter 11 petition for bankruptcy court protection on Oct. 15. The filing wasn’t unexpected as the retailer in the last few years was on a downward spiral toward bankruptcy. After years of losses and financial maneuvers by Lampert to keep the company afloat, the question wasn’t whether Sears would file, but when.

Lampert in turn has come under fire for not understanding both the mechanics of retail merchandising and for not investing in the stores. Some believe that his only interest in Sears was financial, motivated by the company’s huge base of real estate assets, Lands’ End and other assets that over the years have either been spun off or sold off to keep Sears afloat. Lampert in turn has said he has been trying to effect a turnaround focused on an integrated approach called omnichannel, and that he has been hampered by an expensive legacy structure that includes pension obligations.

The going-concern offer from ESL would include a retail footprint of about 500 stores and related real estate interests that include company headquarters and distribution locations, and Sears Auto Centers and the Sears Home Services business. The latter includes the Sears Home Improvement and PartsDirect business units. The Sears Home Services business is a separate asset from the Sears Home Improvement business, which has a stalking horse bid of $60 million from Service.com.

And perhaps to show it does have a heart — not to mention quell some of the criticism from laid-off employees who were promised severance payments at closed locations only to find those promises broken and payments stopped when Sears filed its Chapter 11 petition — ESL said its offer includes a reinstatement of the prepetition Sears severance program for the benefit of all eligible employees.

ESL said its offer is based on preserving Sears as an integrated business. “Purchasing them [all of Sears’ assets] together enhances the value and potential of each by continuing to build on long-held commercial relationships and supporting the synergies created by shared marketing, manufacturing, technology and administrative teams, to name just a few.”

Included in the $4.6 billion bid is a credit bid valued at $1.8 billion. Other components of the contemplated bid include up to $950 million in cash to be funded with the proceeds of a new asset-based lending facility to be obtained by the reorganized Sears, referred to in the letter as Newco; $500 million in a combination of cash and noted to be issued by Newco, and the rollover of about $271 million in cash collateral that’s backing the letter of credit facility. Another component is the assumption of Sears’ liability connected to its “protection agreements” issued by Sears Home Services, gift cards and accrued points under the Shop Your Way loyalty program, all of which has an imputed value of $1.1 billion.

ESL said in its letter that over the last several years it has extended more than $2.4 billion of secured financing to the bankrupt retailer, so it can continue operating while it tried to effect a transformation plan. The hedge fund noted that because of its “significant history” with Sears, it is “uniquely positioned to understand the risks and opportunities of Sears and its underlying assets and move quickly towards the consummation of a transaction.”

The hedge fund said the cash consideration — the component that was allocated at up to $500 million in cash and new notes — would be financed with a combination of equity contributions from ESL, its affiliates and co-investors, as well as new third-party debt financing. ESL also said it is has already obtained proposals from multiple potential ABL lenders and is working with them on their diligence efforts, as well as on the required documentation for a bid.

While the purchased assets contemplated will include $1.8 billion of Sears’ retail inventory and credit card and pharmacy receivables, ESL is also including certain non-debtor assets. The latter includes the Kenmore and DieHard intellectual property, which are held in a separate entity and controlled by Lampert.

As is customary with Lampert, there are also some caveats in his bid. ESL said its interest is “conditioned” on bankruptcy court confirmation of its right to credit bid its secured debt, without any need to collateralize or backstop it. Another condition is a full release by Sears and its debtor affiliates of ESL from any liability related to any prepetition transactions involving ESL. And ESL wants any challenges to its ability to credit bid to be resolved at or prior to a sale hearing connected to its purchase of Newco.

Credit bidding and past deals between ESL and Sears are issues that are topmost of mind for the unsecured creditors committee in the Sears bankruptcy. The committee is seeking expedited discovery on past deals. It also isn’t keen on letting ESL use the dollar value of its credit claims as part of a bid for the retailer. Furthermore, the committee had indicated in court documents that instead of allowing Sears to try to sell itself, a liquidation might have been the better plan. A concern was that even if Sears found a buyer, there wouldn’t be enough cash to operate the business from approval through to the time required to close on the sale.

It wasn’t immediately clear if anyone else would step up to the plate to bid on Sears as a going concern. ESL has been widely expected to become the so-called stalking horse bidder, setting the baseline for other potential bids at a court auction.

On the financial front, time is of the essence for the bankrupt retailer. Sears has said in court documents that it has a monthly cash burn rate of $125 million. It takes in about $210 million in weekly receipts since it filed for bankruptcy, with its rate of inventory turnover “on average” about 26 weeks. But a good portion of some of the proceeds coming in is likely attributable to locations where Sears is closing stores. It’s currently operating going-out-of-business sales at about 180 stores. A budget projection filed with the bankruptcy court connected to debtor-in-possession financing indicates that Sears would run out of cash in mid-January, and that it would need incremental financing of at least $239 million from Jan. 19 through Feb. 16 to actually complete the close on the sale of the company.

Whatever Lampert’s game plan, there isn’t much time to implement it.

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