Sears CEO Makes Offer for Kenmore, Other Assets

Edward Lampert, the hedge fund investor and CEO of Sears Holdings Corp. (SHLD), has offered to purchase Kenmore, Sear’s in-house brand of household appliances as well as real estate and other assets belonging to Sears. The move comes as Sears has failed to find a buyer for its assets during the two years it has been on the market.

Lampert’s hedge fund, ESL Investments Inc., owns a controlling 70% stake in Sears. This morning, the hedge fund disclosed that it had sent an offer for Kenmore on Friday that offers the distressed retailer a potential deal to help it raise the necessary capital, along with other operational possibilities for business sustainability. The Wall Street Journal details the offer which includes ESL’s willingness “to buy Sears’ home improvement business and its Parts Direct business and is willing to submit a proposal to buy Kenmore.”

Eyeing an 'Iconic Brand'

The letter draws synergies expected from the move, stating that "Kenmore is an iconic brand with substantial value, and Sears should aggressively pursue a divestiture of all, or a portion of, Kenmore in the near term. Pursuing these divestitures now will demonstrate the value of Sears' portfolio of assets, will provide an important source of liquidity to Sears and could avoid any deterioration in the value of such assets," reports CNN.

The offer by ESL, if formalized, is expected to further accelerate the rationalization and scale back efforts for Sears. It will fund Sears with the necessary cash to avoid a bankruptcy filing that seems a possibility amid the continually declining business performance of the retailer. Lampert has already devised multiple deals through which he has managed to gain control of Sears’ real estate and other assets.

The proposal offers to buy Sears’ real estate, which includes the associated $1.2 billion debt, could allow ESL to lease some or all of the stores back to the company to allow their continued functioning. Such a move will keep the stores alive and functioning for a longer period that may translate into improved sales and the potential for return to profitability for the company.

A Struggling Former Giant

Sears has been forced to close hundreds of its retail stores over the last few years as it continues to suffer from the overall decline observed in the department-store sector, the increasing competition from online retailers like Inc. (AMZN) and from its own business blunders. The troubled retailer was last profitable in the year 2010, and it has lost around $10.8 billion since then. The company’s distressed finances also led to a default on a portion of its debt earlier this year; the lenders accepted a revised and extended loan repayment schedule. (See also: Who Killed Sears? 50 Years on the Road to Ruin.)

Lampert was instrumental in combining Sears with Kmart stores more than a decade ago. He took over as the CEO in 2013. Sears' Kenmore brand dates back for some 90 years. Though the company continues to suffer mounting losses and declining sales, it is among the top brands for appliances. Sears claims that one in every three American homes has a Kenmore appliance.

On Monday, Sears confirmed the offer from ESL and stated that it is under review by a board committee for the necessary consideration.

Sears stock was trading at $3.10 per share on Monday morning, up around 2% from Friday’s close. (See also: Eddie Lampert's Success Story: Net Worth, Education & Top Quotes.)

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.