After nearly two months of back and forth on a bid — not to mention 12 straight hours of discussion on Monday — Sears Chairman Eddie Lampert has succeeded in winning back the iconic department store chain, a person familiar with the matter told Retail Dive on Wednesday.
The bid, which was submitted through an affiliate of Lampert's hedge fund, ESL Investments, must still be approved by a bankruptcy court. The next hearing on the matter will take place on Friday, during which parties will have the opportunity to object to the auction results. A group of creditors is objecting to the deal, an anonymous source told Reuters Wednesday. They argue they would receive more money through a liquidation and through lawsuits against ESL for deals it has done with Sears in the past, according to Reuters.
Lampert and his team reportedly further sweetened the pot Tuesday by contributing more cash and assuming more liabilities in an improved $5.2 billion bid, Reuters reported. Details of the new bid are not yet public. Lampert's bid was the only one that proposed keeping the department store chain in operation. Under the terms of previous versions of Lampert's proposal, 425 stores and 50,000 jobs would have been preserved.
It appears Lampert has saved Sears. But not everyone is cheering. Creditors, some of which have been skeptical from the get-go, are reportedly organizing to throw a wrench in the plan, and workers rights activists are wary about whether Lampert will provide long-term stability for employees.
"While Lampert's recent offer to include more than $40 million in severance pay for employees is a testament to the mounting call for justice by Sears and Kmart employees and the lasting impact of [the] successful Toys R Us fight, it is in no way a guarantee for employees whose livelihoods are at risk nor does it cover the ill-fated unsecured severance claims stuck in bankruptcy court," according to a statement emailed to Retail Dive from the Organization United for Respect, which played a major role in the fight for Toys R Us employee severance after that retailer's liquidation last year.
What's more, even analysts are leery of the 126-year-old department store's ability to survive in today's retail landscape once it makes it out of bankruptcy. "To the extent Sears reorganizes around a much smaller store base, major hurdles to its long term business will remain," Moody's Vice President Christina Boni said in a statement emailed to Retail Dive on Wednesday.
"Scale, which is critical to competing in retail today, will be lacking and its core customer proposition still remains in question. Sears had been shrinking its store base and reducing costs in recent years but improvement in sales trends and profitability remained elusive," Boni said.
"They had so much stuff, and they just sold it off — anything that was valuable they got rid of," Barbara Kahn, a professor at Wharton's school of business, told Retail Dive in an interview earlier this month. "So it's really hard to see a scenario that makes sense in the future given what's happened in the past and the immediate past."