Sears CEO Eddie Lampert wants retailer to dump more key assets

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ESL Investments, the hedge fund run by Sears CEO Eddie Lampert, recommended that the struggling retailer should consider divesting a number of assets, including the Kenmore brand, Sears disclosed on Monday.

Lampert’s hedge fund wrote in a letter to the retailer late last week that should it decide to sell home appliance brand Kenmore, the Sears Home Improvement business (SHIP) and the PartsDirect business – per the hedge fund’s full suggestion – ESL is open to buying them. Lampert’s fund would be willing to fork over $500 million for SHIP and PartsDirect, Sears said, in addition to submitting a proposal for Kenmore.

Further, the hedge fund said it would make “an offer for certain real estate owned by the company,” including assuming some of its $1.2 billion debt obligations, in order to lease some stores back to the retailer for continued operation.

“We continue to see value in Sears and its underlying assets and believe strongly that with an appropriate runway Sears will be able to complete its transformation to respond to the challenging retail environment,” the hedge fund said in its note, adding that the “substantial value” of the retailer’s assets is not being reflected in the capital markets.

The letter noted that ESL did not care whether it or another third-party ultimately took over the assets, so long as they were divested “in the near term at a full and fair value.” The hedge fund said it would be prepared to come to an agreement within 90 days to help Sears improve its liquidity and debt profile.

ESL is one of Sears’ top shareholders, as is Lampert himself.

The retailer said the proposal would be considered by a committee of independent directors on the company’s board and Lampert would not participate in any pursuant discussions unless specifically requested by that board. The news caused shares of the retailer to surge more than 4% in the early hours of Monday’s trading session.

Sears has been struggling to stay afloat for years, closing hundreds of stores as sales suffer in a challenging retail environment. Lampert has been CEO since 2013.