After Sears Bankruptcy, Eddie Lampert Moves To Acquire Sears Hometown Stores

Hedge fund operator and former Sears Holding CEO Eddie Lampert, whose company Transform Holdco now owns Sears and Kmart, is planning to spend $2.25/share to acquire the 42% of Sears Hometown it doesn't already own. Sears Hometown spun off from Sears Holdings as a separate company about seven years ago.

Sears Hometown has two brands distinct from ordinary Sears stores: Sears Hometown and Sears Outlet. Between the two brands, the company has about 600 stores nationwide. It chalked up net sales of $1.4B in its fiscal year ending Feb. 2, which represented a 15.7% drop year over year.

The company's comp-store sales also took a beating in 2018. For its Hometown stores, sales were off 6% compared with the previous year. For its Outlet stores, the drop was 1.8%.

As part of the agreement, Sears Hometown has the option to sell its Sears Outlet stores, the Wall Street Journal reports. Any sale would need to be for at least $97.5M and close by Oct. 23.

Sears Hometown is a smaller version of the original Sears, selling home appliances, tools, lawn and garden equipment, sporting goods and household goods. Sears Outlet sells discontinued, used, reconditioned, overstocked, and scratched and dented products in various merchandise categories.

Transform Holdco, which is owned by Lampert's ESL Investments, was formed in February. After much uncertainty, but with the approval of the bankruptcy court overseeing Sears' case, Transform Holdco acquired the assets of Sears Holdings — 223 Sears and 202 Kmart stores — for about $5.2B, thus saving the storied retail brand from extinction, at least for now.

Word of the move to acquire Sears Hometown came not long after Transform Holdco filed a lawsuit against the Sears estate, the entity winding down the former Sears Holdings under court supervision.

Transform Holdco is accusing the Sears estate of various wrongdoings, including breaking the agreement by holding on to the chain's headquarters in Illinois, Bloomberg reports. The estate is also delaying payments to vendors and trying to shift $166M in accounts payable costs, the suit alleges.

For its part, the Sears estate is suing Lampert, U.S. Treasury Secretary Steven Mnuchin and others, claiming they transferred $2B of company assets beyond the reach of creditors before the retailer’s bankruptcy — stole the assets, in other words.

Transform Holdco's recent request to the bankruptcy court to not pay $43M in severance pay to former Sears workers attracted the ire of Sen. Elizabeth Warren and Rep. Alexandria Ocasio-Cortez, who sent an open letter to Lampert about the matter. In it, they called Lampert's tenure at Sears "exploitative."

Separately, vendors who recently sold to Sears are claiming the ailing retailer has stiffed them. At a court hearing last month, it was revealed Transform Holdco was trying to get out of paying as much as $139M in vendor debts that the new company assumed when it acquired Sears Holdings' assets, the New York Post reports.