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Sears CEO makes a bid for Kenmore brand, home improvement business

ESL Investments, the hedge fund run by Sears Holdings Corp. chairman and CEO Eddie Lampert, has made a formal offer for one of the retailer’s signature brands — a move to help the struggling department store chain stay afloat.

The hedge fund has offered to buy Sears’ Kenmore appliances brand for $400 million. In addition, the firm also offered $80 million in cash for the Home Improvement (SHIP) business of the company's Home Services division, according to a filing with the U.S. Securities and Exchange Commission. The deal was presented to the company’s board in a letter.

According to the filing, ESL is proposing to acquire Kenmore in a cash deal. However, the transaction is contingent on receiving equity financing from a potential partner. No partner was named in the filing. The company is also currently evaluating a potential transaction involving the company’s Parts Direct repair and replacement business, which is also part of the Sears Home Services division.

The combined deal is designed to “allow [Sears] Holdings to reduce its debt, extend its maturity profile and alleviate its liquidity challenges,” the filing explained.

According to CNN Money, which cited Lampert’s letter to the board, “Speed and certainty here are critical. We believe, therefore, that an expedited process is in the best interest of all parties involved."

ESL Investments first suggested the deal in April, when Lampert sent a letter to the board that said the firm is willing to make a proposal to buy Sears’ Kenmore brand, along with the home improvement products business and the Parts Direct business. In May, the struggling department store chain created a special committee of its board which initiated a “formal process” to explore the sale of these assets.

In the meantime, the company continues to bleed. In its fiscal first quarter ended May 5, Sears reported a 31% drop in revenue. At the same time, the company identified 100 non-profitable locations, many of which will begin store closing sales “in the near future.” (Sears operated a total of 894 stores at the end of the first quarter, which is 381 less than it did one year ago.). Fifteen Kmart stores and 48 Sears stores were expected to close in early September, with liquidation sales set to begin in June.

Coinciding with the store closings and related associate layoffs, the department store chain has made other moves in hopes of raising more cash. In January 2017, Sears sold its Craftsman brand to Stanley Black & Decker for about $900 million, including future royalty payments.

Sears also pursued an opportunity through an unlikely relationship with online giant Amazon. In July 2017, the pair teamed up to sell Kenmore appliances on Amazon’s website. The partnership marked the broadest distribution to date of Kenmore products outside of Sears stores and its websites. In December, Sears began selling a broad assortment of DieHard products on the online giant’s website. Both deals provide the retailer with access to new customers and revenue.

Then in May, Sears Auto Centers began offering full-service tire installation and balancing for customers who purchase any brand of tires on Amazon. The service initially launched at 47 Sears Auto Centers in eight metropolitan areas, including Atlanta, Chicago, Dallas, and New York. The retailer planned to make the service available in all 400-plus Sears Auto Centers nationwide.
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