Sears Holding Company began laying out the groundwork for liquidation after a series of meetings on Friday in which advisors and bankers weighed the merits of a $4.4 billion bid by Lampert’s hedge fund to buy Sears as a going concern, according to Bloomberg, citing sources who asked not to be identified because the discussions are private.
Just before the 4 p.m. deadline on Friday, Chairman Eddie Lampert submitted a bid for $4.4 billion through an ESL affiliate, Transform Holdco, for 425 of Sears’ stores, according to Digital Journal. The Hoffman Estates, Illinois-based company filed for Chapter 11 bankruptcy protection in October.
Even though Lampert has alluded to having a backup plan, in which ESL would pursue the purchase of some of Sears’s parts, including real estate and intellectual property, creditors, bankers, and other parties assessing the bid found a number of shortcomings.
Less about retail and more about real estate
It appears that Lampert made a second proposal – a $1.8 billion bid to buy just the real estate, and let others handle the liquidation. Philip Emma, an analyst with Debtwire and an expert in retail bankruptcies told CNN News that one reason Sears is interested in keeping some stores in parts of the country with higher real estate prices is that this would limit the competition from big-box rivals such as Walmart.
Emma explains that if Sears survives bankruptcy, it would have 223 Sears stores and 202 Kmart stores – mainly along the West Coast and in the Northeast, the mid-Atlantic, Florida, and Texas. In these areas, the value of the land is higher – making the value of the real estate greater.
“There’s not as much density of Walmarts in California and the Northeast as in the Midwest,” Emma said. “You have densely populated areas without a lot of developable space. And there are legal hurdles to developing those kinds of properties in those communities.”
Lampert may be looking at these stores as a valuable asset, and even if Sears does survive bankruptcy, they will have a serious retail problem, says Emma. “The desire to control the real estate was his motivation through this long slide. If there’s any reason Lampert is still involved in this, it’s the value is in the real estate, with a footprint you can’t easily replicate for a variety of reasons.”
A hearing has been set for Tuesday to brief Judge Robert Drain, who’s presiding over the bankruptcy. The hearing will determine if the 125-year-old retailer survives as a going concern or is sold off in pieces, reports the Chicago Tribune.
