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ESL Investments asks Sears to sell Kenmore and other assets

Published 24 April 2018

ESL Investments, a stakeholder in Sears, has written a letter to the US department store company asking it to sell all or a portion of the Kenmore brand and related assets, Sears Home Improvement business of the Sears Home Services division (SHIP) and the PartsDirect business of the Sears Home Services division.

The letter notes that Kenmore, SHIP, and PartsDirect have substantial value and that divesting one or more of them would enable the Company to improve its debt profile and liquidity position.

The letter further states that if the Company determines to pursue a divesture of any of Kenmore, SHIP, or PartsDirect, ESL would be interested in participating as a buyer. In pertinent part, the letter outlines the following:

ESL's non-binding proposal to acquire SHIP and PartsDirect based on an enterprise value of $500 million and on the other terms set forth in the letter;

ESL's willingness to submit a proposal to acquire Kenmore; and

ESL's willingness to make an offer for certain real estate owned by the Company (including the assumption of certain debt obligations secured by that real estate) with the expectation of entering into an ongoing master lease for some or all of the stores to allow for their continued operation.

The letter emphasizes that ESL's principal interest is seeing that the Kenmore, SHIP, and PartsDirect businesses are divested in the near term at a full and fair value, regardless of whether ESL or a third party is the ultimate buyer. To ensure a fair process, ESL confirmed that:

It will not participate in any transaction as a buyer unless such transaction is both recommended by a committee of independent directors of the Company's Board that is fully empowered to consider such transaction, and approved by the holders of a majority of the shares of common stock of the Company held by disinterested stockholders;

Edward S. Lampert and Kunal S. Kamlani will not participate on behalf of the Company (as officer or director) in any discussions, deliberations, negotiations, or decisions with respect to a potential transaction in which ESL participates as a buyer, except to the extent specifically requested by that committee; and

It would accept that any transaction in which ESL participates as a buyer would be subject to a "go shop" process on reasonable terms.

The letter from ESL will be reviewed and considered by a committee of independent directors of the Company's Board. There can be no assurance that this letter will result in a transaction or on what terms any transaction may occur.

The Company does not intend to comment further unless and until it determines that additional disclosure is appropriate.

Source: Company Press Release.