Sears Avoids Liquidation With Last-Minute Improved Bid

Sears Avoids Liquidation With Last-Minute Improved Bid

Sears’ largest shareholder and chairman, Eddie Lampert, won a bankruptcy auction for Sears Holdings Corp., keeping the legendary department store from shutting all its remaining stores.

The bid is valued at over $5 billion and represents an improvement of more than $150 million over the hedge fund manager’s previous offer. Lampert boosted his bid by adding more cash and assuming more liabilities, sources told Reuters.

The billionaire’s proposal, made through his hedge fund ESL Investments, will save up to 45,000 jobs and keep 425 stores open across the U.S.

Lampert was the only bidder at a closed-door auction who sought to keep the company operating as a “going concern.” All of the competing bidders planned to liquidate the company’s real estate, inventory and brands.

The bankruptcy judge in the case still has to approve the sale. A hearing is expected to be scheduled for later this week.

Certain Sears creditors are expected to object to the deal. A committee of unsecured creditors, including mall owners, has accused Lampert’s hedge fund of unfairly structuring past transactions with Sears to benefit itself.

Sears filed for Chapter 11 bankruptcy protection in October. At that time, it had 687 stores and 68,000 workers. At its peak in 2012, its stores numbered 4,000.

Lampert combined Sears with Kmart in 2005, about two years after he helped bring Kmart out of bankruptcy. Lampert personally owns 31 percent of the Sears’ outstanding shares and his hedge fund has an 18.5 percent stake.

If the deal is approved, Sears will emerge from bankruptcy with less debt and a smaller store base but still has to find a path to revive sales. Competitors Macy’s and JC Penney both reported weak sales over the holiday period.

“While there is no doubt that a shrunken Sears will be more viable than the larger entity which struggled to turn a profit, we remain extremely pessimistic about the chain’s future,” Neil Saunders, managing director of GlobalData Retail, wrote Wednesday, according to USA Today. “In our view, Sears exits this process with almost as many problems as it had when it entered bankruptcy protection. In essence, its hand has not changed and the cards it holds are not winning ones.”