Bankrupt US retailer Sears has been saved from liquidation following a successful, last-minute US$5.2 billion bid by chairman Eddie Lampert, subject to court approval. The acquisition includes substantially all of the company’s assets as an on-going concern and preserves the positions of 45,000 employees.
“We are pleased to have reached a deal that would provide a path for Sears to emerge from the chapter 11 process,” Sears’ restructuring committee of the board of directors wrote in a release to investors.
“Importantly, the consummation of the transaction would preserve the employment for tens of thousands of associates, as well as the relationships with many vendors and suppliers who provide Sears with goods and services.”
Provided the sale is approved by the Bankruptcy Court, the transaction is expected to close on February 8, 2019.
The retailer had previously announced plans to close up to 120 stores, though it is not clear whether these closures will go forward with the successful bid.
Lampert made the last-minute bid after several prior offers were turned down for being “administratively insolvent” – unable to cover fees and vendor payments owed by the retailer.
After initially offering US$4.4 billion to purchase the business, as well as a secondary offer to purchase just 250 of its locations, Lampert was forced to raise his bid to US$5 billion in an effort to get the sale completed.
But even this bid was deemed insufficient, and Lampert, through bidding vehicle ESL Investments, upped the offer to US$5.2 billion.
The new bid, while successful, will mean roughly 5000 fewer staff able to keep their jobs as a result of the bankruptcy.
Sears applied for bankruptcy in October 2018, citing a failing turnaround effort to transform the business and unlock the value of its assets.
GlobalData Retail managing director Neil Saunders pointed to Sears’ efforts to “shrink its way to profitability”, and that continuing to do so under the guise of bankruptcy was unlikely to result in a successful outcome for the business.
“Ultimately, Sears needs not just to fix its financial problems,” Saunders said.
“It also needs to repair the deficiencies in terms of retail strategy… only a complete change of management will bring this about.”