Sears Holdings CEO Eddie Lampert is offering to buy the retailer’s Kenmore brand for $400 million through his hedge fund, ESL Investments. The bid comes four months after Lampert wrote a letter to the Sears Board of Directors, urging the company to divest the brand as well as the Sears Home Improvement and PartsDirect businesses.
A separate proposal valued Sears Home Improvement at $70 million, with a potential extra $10 million if the company met certain financial benchmarks.
“Completing the acquisitions of Kenmore and Sears Home Improvement will enable Sears to improve its debt profile and liquidity position, creating the runway to help continue its transformation, and allow these businesses to unlock their considerable potential by further expanding their presence in the marketplace,” according to a statement from Lampert.He has said he’s prepared to close on the deal in as little as 60 to 90 days.
With the beleaguered retailer continuing to see rapid sales and income declines at both Sears and Kmart, a sale of still-valuable assets would once again infuse cash into the long-struggling company. Sears is no stranger to this strategy: it spun off the Lands’ End brand into a public company in 2014, selling 235 locations to a real estate investment trust that Lambert chairs in 2015 and selling the Craftsman brand to Stanley Black & Decker for $900 million in 2017.
Despite the sales of these assets — on top of ESL’s roughly $2 billion in combined loans to Sears — the retailer has experienced absolutely no signs of a turnaround. Sears has lost $11.2 billion since 2010 — its last profitable year — and sales have plunged 60% in that time.
Like many of the moves Lampert has made in an effort to revive Sears, the Kenmore bid faces criticism due to allegations that it would further strip Sears of any remaining value it has. On top of that, Lampert would still own the property and still make money on it via ESL Investments, while the retailer would likely continue its downward spiral.
“Selling off assets to fund a loss-making operation will not make Sears sustainable,” said Neil Saunders, Managing Director at GlobalData Retail in a RetailWire discussion. “At best it buys time, at worse it just accelerates the eventual demise as it weakens the balance sheet and means Sears will eventually be worthless. In some ways, the move is quite appalling. It means that Lampert is able to carve out the few remaining bits of Sears that are successful and integrate them into his other companies. If Sears then goes down the drain, Lampert has separate control of the good bits and can recoup his losses/loans from Sears through a full liquidation.”