Sears chairman Eddie Lampert’s investment firm upped its bid for Sears Holdings to nearly $5.1 billion, and the retailer will live to see at least Sunday.
According to a regulatory filing, as of Jan. 10, Sears stockholders are Lampert, as well as a slew of organizations that list him as CEO: ESL Partners LP, JPP II LLC, SEP I Partners LP, SPE Master I LP, RBS Partners LP, ESL Investments Inc. and JPP LLC.
What’s more, in a letter dated Dec. 28, 2018, Lampert noted ESL has extended more than $2.4 billion of secured financing to Sears Holdings over the last several years. That includes $1.25 billion from ESL affiliates JPP and JPP II, the Sears pension plan and other investors in April 2016, as well as a cumulative $700 million from JPP and JPP II in 2017.
As required by the bid procedures, ESL Investments affiliate Transform Holdco LLC made a $120-million deposit in cash with an escrow agent—including $17.9 million that is non-refundable.
“Based on … our familiarity with the business of [Sears], we are confident that [we] can move quickly towards the consummation of a transaction as soon as possible following the conclusion of the Auction and approval by the Court,” Lampert wrote in a letter to financial advisory and investment banking firm Lazard Freres & Co.
A Sears representative declined to comment.
The revised proposal will terminate by 5 p.m. ETS on Jan. 13 if Sears doesn’t confirm Transform will participate in the Jan. 14 auction, or by 5 p.m. EST on Jan. 16 if Sears has not confirmed Transform is the successful bidder. “As always, we remain enthusiastic about the continuation of Sears as a going concern and its future potential,” Lampert added. “We hope this letter serves as the beginning of an exciting and transformative new chapter for Sears.”
His previous bid—$4.4 billion for approximately 425 stores, 50,000 employees and the Sears Auto Centers, Shop Your Way, Monark, Innovel and Sears Home Services brands—was rejected, but a federal judge in bankruptcy court gave Lampert another chance.
In the letter revising his bid, Lampert said his firm is “prepared to acquire substantially all of the go-forward retail footprint and other assets and component businesses … of Sears.” In so doing, Transform will assume up to $663 million in additional liabilities from its previous offer, including up to $166 million of payment obligations with respect to goods ordered by debtors; up to $139 million of Bankruptcy Code section 503(b)(9) administrative priority claims; up to $43 million of additional severance costs; up to an estimated $180 million in costs related to contracts and up to $135 million in property taxes.
In exchange, Transform wants 57 additional real estate properties; accounts receivable for home warranties sold in 2018 with a value of approximately $53.6 million; other accounts receivable with a value of at least $256 million; additional inventory with a value of up to $166 million and prepaid inventory with a value of at least $147 million.
In its prior bid, Transform said its offer will be “significantly less” if it has to bid on assets separately—and it is submitting bids for individual assets in the event the bid falls through. Those include $5 million in cash for logistics company Innovel (formerly Sears Logistics); $25 million for repair company Sears Home Services; $100,000 for data and IP from loyalty program Shop Your Way and approximately $150 million for IP including Sears trademarks and the rights to receive royalties.
Lampert also noted his proposed business plan “envisages significant strategic initiatives and investments in a right-sized network of large format and small retail stores, digital assets and interdependent operating businesses”—and Transform would be willing to acquire Kenmore and DieHard IP from Sears Holdings subsidiary KCD IP for additional cash.