Edward Lampert might be trying to get the whole Sears gang back together again.
Sears Hometown & Outlet Stores, a spin-off of Sears, recently received a bid to acquire all of its remaining shares from Transform Holdco, the new company Lampert established when he bought Sears out of bankruptcy last February.
“We believe our proposal, which will provide certain value and liquidity at a considerable premium to the market price, presents a superior outcome for [Sears Hometown & Outlet Stores] stockholders as compared to the uncertain outcomes facing [Sears Hometown & Outlet Stores] if it continues on its current path as a standalone company,” Lampert wrote in a letter to Sears Hometown and Outlet Stores’ board. “In addition to the immediate value provided to [Sears Hometown & Outlet Stores’] stockholders, we believe that the transaction would benefit the company’s other stakeholders, including employees, independent dealers and franchisees and the local communities that rely on them.”
Sears Hometown & Outlet Stores aren’t part of the iconic retailer. In fact, Sears Hometown & Outlet Stores spun off from Sears Holding Corp. back in 2012 before spin-offs were even a thing.
The spin-off of Sears Hometown & Outlet stores was an attempt to increase profitability for roughly 1,100 Sears Hometown stores nationwide that sold hardware and appliances, and 122 Outlet stores that sold Sears merchandise, including apparel, appliances, gardening equipment, sporting goods and electronics, at discounted prices.
Lampert, who was chief executive officer and chairman of Sears at the time of the 2012 transaction, owns 58 percent of Sears Hometown & Outlet Stores, by way of his hedge fund ESL Investments and its affiliates. ESL is also the majority owner of Transform Holdco.
Lampert’s recent proposal price is $2.25 a share for Sears Hometown & Outlet Stores common stock, which Transform said in a Schedule 13D filing with the U.S. Security and Exchange Commission was a 23.6 percent premium to the average share price the five trading days before the offer was made.
Sears Hometown & Outlet Stores did not respond to a request for comment.
But according to the Schedule 13D regulatory document, on April 7, “representatives of [Sears Hometown and Outlet Stores] communicated to representatives of Transform Holdco and the reporting persons that the special committee of the board formed to evaluate the offer was unable to conclude that a transaction on the terms proposed in the offer letter would be in the best interest of [Sears Hometown and Outlet Stores’] stockholders unaffiliated with the reporting persons.”
The company’s web site reads, “Sears Hometown & Outlet Stores Inc. is not part of the bankruptcy filing by Sears Holdings Corp.” And continues in bold letters, “It remains business as usual at Sears Hometown and Outlet Stores.”
A representative from Transform Holdco said in an e-mail to WWD on Monday that ESL and Transform Holdco are “supportive of the proposal and would commit to contribute their holdings to Transform Holdco should the transaction be completed.”
“The proposed transaction would reunite the retail footprints of Sears and Kmart with Sears Hometown and Outlet Stores.…Transform Holdco also believes that bringing these businesses back under common ownership would help stabilize the Sears Hometown and Outlet Store business in the interest of all its stakeholders and enhance efficiencies of scale, deepen partnerships with vendors and offer an even more convenient shopping experience for members and customers.”
Sears, once America’s largest retailer, filed for Chapter 11 bankruptcy on Oct. 15, 2018. At the time it was burning through $125 million in cash a month, while the total store count had fallen to just under 700 combined Sears and Kmart stores. That’s a comparable difference from the roughly 3,700 Sears stores the company had at its peak in 2006. Sears revenues had also dwindled to just $16.7 billion in 2018, down from $53 billion in 2006.
When Lampert’s bid to buy what was left of the company for $5.2 billion in February was approved, there were just 425 stores operating under the Sears and Kmart nameplates around the country. Earlier this month, Transform revealed it was opening three new Home & Life stores in May. The new locations will be only a fraction of the size of original Sears stores and will not include apparel.
Meanwhile, Sears Holding Corp’s stock shot up nearly 11 percent during Monday’s trading session. Shares of Sears Hometown and Outlet Stores, which trades on the Nasdaq under the ticker “SHOS,” were up more than 13 percent the same day.