Sears Holdings Reminds Restoration Hardware of its Upper Hand
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The key paragraph in the letter filed yesterday from Sears Holdings (SHLD) is the last one, where it calls out to management and the board of Restoration (RSTO) and states that "as your largest stockholder, we are concerned by certain aspects of the management and director-led buyout."
Now, it should also be noted that Sears upped
its offer from $4 an share to $6.75 a share. Sears, being the largest
shareholder (double that of the next largest shareholder) here does
have management in a precarious situation. I would bet Lampert has been
buying more shares recently (or soon will be) and will up his ownership
percentage. At that point, what management wants to do could become
essentially irrelevant.
One has to think management is
stonewalling Sears in order to keep their jobs since they are the ones
trying to buy the company currently. If Lampert gets control of more
shares, it will become a moot point. Currently shares trade about 25
cents over Lampert's offer price, indicating folks feel Lampert will
eventually pay more. That being said, Lampert could double his
ownership to 27.4% for about $1.5 million more than he would pay if the
offer price was accepted. It would be a rather cheap premium to pay to
all but assure a deal.
Also, the letter twice refers to Sears as
"your largest stockholder". It is a veiled way of saying "hey, we own
more of this sucker than you do, want to get ugly?
Go ahead."
Now,
Restoration management has done the right thing in waiting this out
until now to get a higher price. However, there now comes a point where
they will be viewed as obstructing the process rather than getting the
best deal. This is especially apparent since they are the other bidder
for the company and their offer is now inferior to the one Sears has
made. Sears, being the "largest stockholder" does have the the upper
hand should things get contentious.
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