Eddie Lampert officially wins auction for what's left of Sears
Sears has a new lease on life, but it could be a tenuous one. Eddie Lampert, the company's chairman and biggest shareholder, on Wednesday morning emerged as the winning bidder for the bankrupt retailer, a person familiar with the matter told CBS MoneyWatch. His hedge fund ESL Investments confirmed the billionaire investor's successful $5.2 billion bid on Thursday.
Lampert has touted his plan to buy Sears as one that would save up to 50,000 jobs and keep 425 Sears and Kmart stores operating in the U.S. He relinquished his role as CEO of Sears after the company filed for Chapter 11 bankruptcy protection in October. Since then, it has shuttered hundreds of stores and laid off thousands of workers.
His winning $5.2 billion bid was increased from an earlier proposal that followed an auction that began Monday behind closed doors at the New York offices of Sears' lawyers. "We now look forward to concluding the bankruptcy process as soon as possible and doing the hard work of putting this iconic American retailer on a path to sustainable success." Lampert's ESL announced Thursday. Its statement added that the deal "will also fund certain severance costs incurred by Sears during bankruptcy and reinstate severance benefits for eligible employees in a new company. In addition, it will honor commitments to loyal customers who purchased products with extended warranties and support affected vendors, who will retain a valuable source of revenue."
With Lampert at the helm, the more than century-old retailer was kept afloat on loans from ESL and by selling its Craftsman tool brand and trying to sell its Kenmore appliance brand. Some of the retailer's creditors question in court filings whether Lampert's actions benefited ESL more than Sears.
Neil Saunders, managing director for retail at GlobalData, believes Lampert, as a big lender to Sears, wants to keep the business going to generate more cash -- money that would help pay down debts owed to his other business interests.
"There is also a property play as Lampert is a Sears landlord, so if the company keeps going, he can collect rent on some of the stores," Saunders added.
Four years ago, Sears created a real estate investment trust, or REIT, to extract revenue from its properties. It sold and leased back more than 200 properties to the REIT, in which Lampert is a significant stakeholder.
Lampert owns 31 percent of Sears' outstanding shares, and his hedge fund holds an 18.5 percent stake, according to FactSet.
Sears, hit hard during the recession and facing changing consumer tastes and strong competitors, hasn't recorded a profit since 2010 and tallied 11 consecutive years of declining sales. Lampert has been criticized for not investing in the stores, which remain shabby.
As Philip Emma, a senior Debtwire analyst and an expert in retail bankruptcies, put it: "There has to be some level of investment to keep it going, unless something changes with the status quo of how it's run."
-- The Associated Press contributed to this report.
