Judge approves Lampert’s $5.2B Sears takeover bid

  • Judge approves Lampert’s $5.2B Sears takeover bid

Judge approves Lampert’s $5.2B Sears takeover bid

Bankruptcy Court Judge Robert Drain approved the sale of most of the retailer's assets to a hedge fund controlled by Eddie Lampert, the company's chairman, for $5.2 billion.

Drain clashed with Abid Qureshi when the lawyer for the unsecured creditor committee claimed that Lampert tainted the auction process when ESL sent a letter threatening to sue Sears' board of directors. The agency last week took over two underfunded pension plans covering 90,000 Sears retirees and other beneficiaries.

Lampert's fund, ESL Investments, intends to keep 425 Sears and Kmart stores open, saving the jobs of 45,000 employees - a move that Judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of NY described as credible.

"Other than the things-that-we-make-money-in store, there is nothing from a consumer standpoint to ties that all together", he said.

Lampert steered Sears into Chapter 11 bankruptcy protection in October.

Lampert has made several statements throughout the process that he believes the smaller Sears, without the unaffordable levels of debt, will be a profitable and competitive retailer. Another 262 stores have closed or are expected to close by March. "We have not come to terms with ESL". In his bid, Lampert said he would cut overhead expenses in half.

Drain's decision capped three days of hearings.

"It maximizes the value of the assets while preserving the claims against ESL/Lampert", said Wander, a partner with Davidoff Hutcher & Citron in NY.

"Scale, which is a critical to competing in retail today, will be lacking and its core customer proposition still remains in question", she said.

Sears and Kmart employees organized by Rise Up Retail greeted the judge's decision with "both a sigh of relief and outrage", organizers said in a statement. Sears employees represented by the group are calling for a financial hardship fund for laid-off workers and to give employees a seat on Sears' boar.

The ruling means that thousands of jobs have been saved and 425 stores will remain open for now, according to Reuters.

Sears over the years spun off clothing manufacturer Lands' End and parted with 235 of its best stores for $2.7-billion to a company Lampert created called Seritage Growth Properties Drain intervened multiple times to urge Sears advisers and Lampert's negotiators to keep working toward a deal. And Sears has indicated in its filings that it expects to transition out of large stores of about 160,000 square feet to stores less than one-tenth that size. Lampert, who was the retailer's CEO until the bankruptcy filing, hasn't outlined plans for transforming Sears, while the company continues to face cutthroat competition from Amazon, Target and Walmart. Sears and Kmart have been struggling since their merger in 2005, and the company has not turned a profit since 2010.

ESL plans to finance a portion of its purchase by trading $1.3 billion in Sears debt it holds for ownership in the reorganized company.

Creditors also argued the sales process was unfair and set up so that no one other than Lampert could buy the most valuable assets of the company.

Drain, after issuing the ruling, acknowledged that Lampert has been excoriated for his leadership of Sears and offered him some advice.