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Sears CEO’s hedge fund buys rest of chain’s assets

The long saga of Sears department stores has a new and possibly final chapter. The 132-year-old chain recently confirmed that that the ESL hedge fund of Sears CEO Eddie Lampert has won tentative approval to purchase the final 425 stores as well as the rest of the chain’s assets during a bankruptcy auction (the company filed Chapter 11 in October of 2018). The purchase for $5.2 billion is subject to court approval on February 1. If approved, the deal would then close on February 8.

Liquidation avoided

The 132-year-old company still employs about 45,000 workers, which got to keep their jobs despite calls from unsecured creditors for liquidation. The company has teetered on the brink of insolvency several times since Lampert’s hedge fund bought it.

Critics and creditors of Lampert and ESL claim that the sum parts of the company are worth more than the company. The chain will continue to provide tax breaks to ESL thanks to years of net operating losses. Lampert has also courted controversy by selling the company’s more lucrative assets like Craftsman Tools, Lands’ End and Kenmore (the latter two were then purchased by ESL). ESL has also taken the unusual step of buying hundreds of stores and either selling the desirable real estate or renting the stores to their previous owners. While some question their wisdom, these moves have added some desperately needed liquidity to the business.

High finance and legal issues

The Sears saga has been followed in the media because of its iconic place in U.S. culture, but also the controversial approach taken by Lampert. Whether the CEO gets the last laugh or not, other business owners would be wise to work with attorneys who have experience handling business law, transactions, bankruptcy and other important matters. These attorneys can help clients weigh options to determine the best course of action whether the company is worth thousands, millions or billions.

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