Sears Holdings Chairman Eddie Lampert has confirmed that he and his hedge fund ESL Investments have increased their last-ditch bid to $5 billion to save the 126-year-old chain from liquidation. Sears will assess the bid during a Jan. 14 bankruptcy auction.
Despite Lampert’s failure to submit a revised offer by the Jan. 9 bidding deadline after Sears rejected his $4.4 billion bid, U.S. Bankruptcy Court Judge Robert Drain agreed to give him an additional day to place another bid.A group of Sears creditors, including some landlords and vendors, have strongly protested the bid, claiming that it fell short in covering vendor fees and payments. The group has been calling for the chain to shut its doors for good, saying they will recover more money in a liquidation scenario.
As part of the previous bid, Lampert planned to acquire 425 Sears and Kmart stores that are still open. The new offer is anticipated to preserve up to 50,000 jobs and cover approximately $166 million in merchandise payment obligations to vendors and $43 million in additional severance costs. The hedge fund also will assume $135 million in tax bills for properties that Lampert hopes to acquire as part of the deal. The bid even would award $35 million to unsecured creditors in exchange for a release from future litigation over transactions that ESL Investments has carried out in the past.
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Ultimately, the Sears Board of Directors will need to decide how Lampert’s bid stacks up against a rival offer from a liquidator. Sears has until 5 pm Eastern on Jan. 13 to agree to allow ESL to be a part of the auction. If not, ESL will pull its bid. The bid also will be pulled if Sears does not confirm that ESL has been selected as a “successful bidder” by 5 pm ET on Jan. 16.
Prior to the extension, the retailer had been planning for a separate February auction of its assets and real estate. Lampert still planned to bid for some of those assets if his efforts to stave off liquidation failed. The assets could potentially include the Kenmore brand, which Lampert already offered to buy for $400 million prior to the retailer’s bankruptcy declaration.
“The one category of strength is their appliance business, which has continued to capture a relatively strong (albeit declining) share of category sales and has driven adequate search visibility,” said Chad Bright, Managing VP at Gartner in commentary provided to Retail TouchPoints. “What remains to be seen is what happens to the Kenmore brand, which has continued to be a bright spot and has maintained strong consumer awareness, with indexed Google search volume outpacing Kitchen Aid by nearly 3X.”
