Sears: Going Private? Not So Fast

This has been going around for a long time now so let's take a look because as the price falls and Sears' (SHLD) Chairman Eddie Lampert continues buying shares, some folks are claiming his goal is to take the company private and shareholders, except him, will get "screwed" for lack of a better term.

While Lampert may continue to buy shares and increase his ownership percentage, Sears is not "going private" for a number of reasons.

From the SEC Website:

If the transaction is initiated by an affiliate (an insider) of the company, or the company could be deemed to be making an acquisition of its own shares Rule 13e-3 of the Securities Exchange Act of 1934 requires the affiliate and/or the company to file a Schedule 13E-3 with the SEC. When Rule 13e-3 applies, the company is said to be “going private” under SEC rules. While SEC rules don't prevent companies from going private, they do require companies to provide information to shareholders about the transaction that caused the company to go private. The company also may have to file a merger proxy statement or a tender offer document with the SEC.

The filing of a Schedule 13E-3 is also required when issuer-initiated or affiliated transactions result in a company’s publicly held securities no longer being traded on a national securities exchange or an inter-dealer quotation system, such as Nasdaq.

The Schedule 13E-3 requires a discussion of the purposes of the transaction, any alternatives that the company considered, and whether the transaction is fair to all shareholders. The Schedule also discloses whether and why any of its directors disagreed with the transaction or abstained from voting on the transaction and whether a majority of directors who are not company employees approved the transaction.

Going private transactions require shareholders to make difficult decisions. To protect shareholders, some states have adopted corporate takeover statutes that provide shareholders with dissenter's rights. These statutes provide shareholders the opportunity to sell their shares on the terms offered, to challenge the transaction in court, or to hold on to the shares. Once the transaction is concluded, remaining shareholders may find it very difficult to sell their retained shares because of a limited trading market.

So the "Lampert can force a share sale" is erroneous. While he could take the shares off the market by "going private", he cannot force you to sell your shares to him if Sears decided to go private. You could still opt to retain your ownership percentage. It is different from a merger in which you "exchange shares" from one company for another.

"Fairness of offer". This was a large bone of contention in the failed Sears takeover of Sears Canada. Sears USA owned 53% of the outstanding shares of Sears CA at the time of the offer. The buyout was fought in court by minority shareholders who eventually prevailed. The fact that Lampert has been buying shares at prices far above where they sit now, would eliminate any argument he would make that a "going private" price he is offering does NOT violate this element.

Also, current minority shareholder Bill Ackman, who led the fight against Lampert in his Sears CA bid, is now a Sears Holdings shareholder. Ackman bought in at prices well above current valuations and anyone who knows anything about him knows he would fight any "going private" bid below the $100 plus a share he paid.

Let's also not forget the conflict of interest here. Using shareholder money to eventually take the company from them for yourself, despite public comments to the contrary, would spark a wave of lawsuits Lampert has no interest in spending the next 10 years fighting.

That being said, roughly 60% of Sears' shares are held by Lampert, Management and Funds that are value oriented. What is more likely is that Lampert will continue to repurchase shares and shrink the float. Now, consider this, when you subtract short shares (26 million) and shares held by long-termers, it leaves only 27 million shares actively trading, or 20% of the total.

At today's prices that means $2.1 billion can buy the remaining trading float and then you create a short squeeze like you have never seen as shorts rush to buy shares that virtually do not exist to cover their positions.

Anyone want to bet this is Lampert's real game? Keep buying up what trades and then watch the shorts cut each other's throats to cover. It would be justice for him and really profitable for shareholders, as the buying without selling would cause share prices to rocket up.

What does Lampert gain by going private? If the goal is to attain wealth, then isn't having Sears publicly traded the way to go? Won't his wealth climb faster that way than if Sears is privately held? Maybe he takes it private, "fixes" it and then spins it back out for a nice profit? Well, if that is true, then why not just keep your shares and ride the wave? Either way, if his goal is the same as yours, where is the problem?


Disclosure: Long SHLD

Comments

[malachhamovess]

if eddie wants the company, he can have it. the only way for him to create a short squeeze is to keep buying up shares of a company that's loosing money faster than it can be printed

[MSF]

What short squeeze - what good news is coming out.

It's getting worse and worse.

He does not know what to do with Sears.

He is focused on his hedge fund where he makes millions in fees Sears is for wtite downs on his gains.

[MSF]

Here is another issue.

Why is there only 2 or 3 big hedge fund managers that see something in Sears.Recently 2 managers sold off all their shares.Including months ago Vornado realty which is a huge real estate developer and management company.By the way they are up this year,,,,,luckily they sold off Sears.

To make it short why doesn't Warren Buffett own shares of Sears.
If Sears is what it is made out to be why doesn't Buffett own one share of the stock.

Is it only people like Cramer that sees something and said to buy all the way up to $180.What a moron.Now he says not to buy,,,,gee thanks.Not to mention he says he only can trade for charity that's fine,but I wonder who trades for his wife's and childeren's account.He never mentions that on his show.I have called the show many times on this and have never received a response.

Let me see who should I follow Buffett or Cramer.

[MSF]

" LOSE MONEY " STARRING JIM CRAMER

[JohnPseudonym]

Sears isn't going private, they are going bankrupt.

Sears is a bloated, corrupt Chicago bureaucracy filled with people interested in lining their own pockets with as much gold as possible before the ship sinks.

K-Mart will fail first and then the remains (Sears) will linger on life support until the reaper shows up or they are saved by a new CEO.

I'm betting on the reaper...

[SharkSandwich]

Corrupt? What evidence do u have of this John? Bloated? Inventory you mean? Yes, agreed however that is temporary. Cramer is a non event. Lampert, Ackman, DEShaw, Pabrai, Tisch, Miller etc... These are serious value investors with patience. You can't compare Sears to a Target or a Wal Mart. It's not that kind of retailer. It is, unlike a Wal Mart, a brand rich co. And, unlike TGT or WMT, they can and will sell their real estate and be gone with the stores after they are sold. No sale lease backs in store here. That is one of the myths about WMT or TGT. Selling their real estate to generate cash to pay a large dividend doesn't make sense when you plan to run those stores and lease it back from the buyer. Margins go down and you become less profitable. Period. Sears is an asset rich co., not a traditional retailer anymore, despite what Lampert claims to be telling us. If we didn't own brands or the services that they do, this co would be in trouble. That just simply isnt the case. I love reading all the chest-pounding "I told u so" bearish posts. It's a shame that stock prices still dictate the reactions. When it was at $170 everyone loved the co. Now at $78 everyone hates it. In the long run, the co. is in the exact same shape it was at both stock prices. Investing is a great business because it's a zero sum game. There will be one winner and one loser. I might conclude that being short the last 9 months has been the easiest thing to do. At some point, it'll rip your lungs out

[JohnPseudonym]

Corrupt? This evidence will come out in autopsy.

For now, all I need to see is the gross mismanagement and physical decline of the stores to know this business is being pillaged by those at the top for all it is worth.

[JohnPseudonym]

There was an article in Mass Merchant Retailer a few issues back where they reported that Sears had determined why their sales were falling:

"Our conclusion (for the ongoing drop in sales) is that our customers prefer to shop our competitors stores for a variety of reasons".

[SharkSandwich]

Exactly!!!!! They know that. They aren't in denial. They have a set time to find a solution or liquidate. Plain and Simple.

[FrankWaddell]

I have no position in this company yet, however, I enjoy reading your well researched write-ups on this company. Just wanted to give you a pat on the back for good information/articles, in spite of the direction of the share price. Keep up the good work.

[MSF]

Could it be that Lampert does not give any direction because he does not have one.

Todd have you given up too.

[bulrun100]

WHAT A BUNCH OF SHORT MORONS!YOUR DAY WILL COME.REALLY INVESTORS WILL LAUGH AT YOUR PAIN.

[bulrun100]

OOPS!REAL BUT STILL TRUE!

[MSF]

Bulrun good name but not for Sears.

Buy Sears today and maybe your grandchilderen's grandchilderen will love you for it.

[JohnPseudonym]

"Buy Sears today and maybe your grandchilderen's grandchilderen will love you for it."

Why will they love you for losing their inheritance by putting it in a bankrupt company with no leadership?

[bulrun100]

NO KIDDING NOT A BULRUN FOR SHLD OR ANY RETAILER(BESIDES COST WMT)MORONS! YOU KNOW IT WOULDN'T BE A BLOG WITHOUT SOME CLOWNS!!! KEEP UP THE GOOD WORK.BOTH OF YOU MORONS WILL CLAIM BANKRUPTCY BEFORE SEARS HOLDING!JUST PURE STUPIDITY!AGAIN GREAT WORK!

[MSF]

ARE YOU RELATED TO TODD?

[bulrun100]

ARE YOU RELATED TO BOZO?

[JohnPseudonym]

Anyone that shops in a Sears or Kmart and then goes home and invests money in the stock is insane.

Kmart is an embarrassment. I live in an upper middle class area. The Walmart here is brand new and my 5 year old ask if it was a new mall; very clean, modern, superb.

The Super Kmart down the street has had a leaky roof for 2 years. The managements answer is to put buckets where ever it leaks.

The stores are dirty, outdated, falling apart, prices are high and selection is low.

K-Mart is a dead store walking...

Oh, cars in the lot at 3PM on Saturday?

Kmart; Maybe 75 or so.

Walmart: good luck finding a spot.

[MSF]

Hey Todd,your buddy Cramer is now avoiding the stock.

What a scumbag after all that pumping hei s now dumping.

[MSF]

Bulrun whats the matter you bought when that moron Cramer said to buy.

Look now he says he has no confidence in Sears.
No kidding Cramer you fool.

[MSF]

Todd what about those $80 calls purchased by Berkowitz.

You posted it as a bullish sign so much for those value leaders.

Are you hiding now.

[MSF]

TODD ARE YOU STILL SMILING.

TODD IS HIDING.

BULRUN ARE YOU FEELING BETTER.

[MSF]

CONGRATULATIONS LAMPERT AND SEARS LOWER LOWS EVERYDAY.

LOL

[bulrun100]

Bought in the range of $134-83! And will buy more because I know and am confident in Sears Holdings value.Those call options are very bullish if your heads weren't so far up each others asses you'd know that.I only waste my time posting with you clowns to see how wrong you will be!:))))))

[MSF]

WOW , I thought Cramer was a scumbag but not like this.

I just read his blog on Sears he says he has no confidence with Sears and the only retailers he likes are.....wasn't he the one saying that Sears is not just a retailer....what a piece of garbage so he feels everything else is worthless too.

[MSF]

Bulrun don't worry Cramer loves ya.

[bulrun100]

Don't follow Cramer but I guess you do!

[MSF]

Todd,

You know how much Cramer was bullish on Sears and now he says to avoid and to sell it now.

My question is this if Cramer says to sell it what do you still see that he does not.

Please answer it is really rude and not professional when you do not.

[mothernature]

I have worked for sears for many yrs ..And i have seen lots of changes..and most not for the better....I recently retired..and took everything out while the going was good ...I have lots of friends that still work there and if i could tell them what to do i would tell them to get out now...while they still have something left... ALL I SEEN WAS PEOPLE WALKING OUT WITH CART FULL OF ANYTHING THEY WANTED...AND NO ONE TO STOP THEM BOY THAT DIDNT HAPPEN YRS AGO...SO WHERE IS THE MONEY GOING MMMM OUT THE DOOR...ITS REALLY A SHAME ....

[bulrun100]

POST THE LINK TO THAT!OR AS USUAL YOU MAKING THINGS UP!

[bulrun100]

MOTHER STORY MAKER

[MSF]

Todd you have not made a response it shows what you know and how immature you are.

[bulrun100]

IMMATURE HE LET'S THE FACTS SPEAK FOR THEMSELVES. WHAT DOES HE CARE WHAT YOU SAY OR CRAMER SAYS(THAT YOU SAY)!IN CASE YOU HAVEN'T NOTICED ALL RETAIL, THE WHOLE MARKET THE ECONOMY IS IN THE [Comment edited for abusive language. Commenter put on watch.] .GO BUY SOME CD'S AND SHUT YOUR [Comment edited for abusive language. Commenter put on watch.] !

[MSF]

Bulrun relax and take your medication.

Where's Todd,,,lol.

[JohnPseudonym]

This stock is going to 60 at least. Looks like a bounce is due; but the trend is down and with the stores in the condition they're in and management bent on letting them fall apart, it doesn't look good long term.

Crapsmen tools were the quality brand, now it's just Chinese junk like all the rest. Only Snap-on makes good stuff any more.

I haven't bought crapsmen tool in a decade and have no plans to ever buy one again...JUNK!

<img src="bigcharts.marketwatch....; alt="">

[JohnPseudonym]

bigcharts.marketwatch....

[JohnPseudonym]

"Bought in the range of $134-83! And will buy more because I know and am confident in Sears Holdings value.Those call options are very bullish if your heads weren't so far up each others [Comment edited for abusive language. Commenter put on watch.] you'd know that.I only waste my time posting with you clowns to see how wrong you will be!:))))))"

So you've lost between $10 and $60 a share riding this dead horse down a cliff and we're the "clowns" with our "heads up each others [Comment edited for abusive language. Commenter put on watch.] "?

Sound like your just angry about losing all that money in this worthless company.

[MSF]

Todd where are you.

You are showing what kind of man you are.

[MSF]

Todd is simply speechless.

LOL

[MSF]

Wasn't it Cramer saying Sears is not just a retailer.

So why is it he is saying now to not buy Sears but to sell it because he likes other retailers.

What a 2 face phony.You call his show and leave messages regarding that question and he does not call you back.
He makes you think the show is live when it is not so if a caller says something he can't answer it is deleted out.

You send emails its the same thing no resonse.

He said to buy Sears all the way up to $180.Pumping and Pumping.

Now he says he was wrong.What a scumbag.

"LOSE MONEY'' STARRING JIM CRAMER

[bulrun100]

Pseudonym/MSF! Yes clowns sorry you are what you are! Cost basis is $114.00 not happy about that of course. No one ever wants an investment to go down but when the market is down 30-40%.With the rest of retail is down 50-70-80% I can handle 30-40% on shld and sleep at night!You moron's talk like this isn't the case.The way you guys talk the markets up big and retail is doing just fine.HEY a clown is a clown and a moron is a moron.My advice is to watch some TV read a paper before you type or speak then maybe intelligent people won't call you clowns or morons someday! Happy Investing!

[MSF]

Bulrun let me ask you this why did that worthless imbasile Cramer pump Sears so much it was like he was married to Lampert and now he says to sell.
He said to buy it at $180.
Tell me.

[MSF]

Forget a response from Todd he is to busy eating donuts.

[GitRichorDieTryin]

I've been long on SHLD since I got in around $150 range. ESL investors first have to be invited, then invest at least $25 million and lock it in for 5 years no-questions-asked with Eddie. He can use it to buy more and buy or anything he feels like. SHLD dropped enough to make all the weak holders jump out the window. Don't just look at SHLD as a retailer. Eddie didn't come into the scene to sell more crapsman, or whirlpool fridges. He can squeeze gold out of your crap so wait and be patient. If it's more risk than you can bear than there are much better ways to invest your money - going long with SHLD is somewhat getting some of that hedge-fund play without having to put up $25 million for 5 years. We know the rich just keep getting richer. Investors can always get back on the bandwagon when they sense SHLD is on it's way up again. So don't rush to buy if you want to see a bottom.

[JohnPseudonym]

Sears fell apart while the economy was moving right along. Now the economy is at least slowing, possibly contracting or worse. So what makes you think Sears will be more profitable than ever?

Sears Craftsmen tools are junk, their appliances suck too.

Sears.com is a freaking disaster; 80% dissatisfaction rate.

www.resellerratings.co...

The stores are tired, poor service and high prices for Chinese junk.

The company is being driven into the ground and you intend to invest in that process?

Tell me what you see that I don't? How is Sears turning all this around?

[bulrun100]

Cramer is a clown never really followed him.If he infact now says sell you would have to ask him for that answer.I as an investor would think he would say buy now.But I guess you both have that clown thing in common!I also like the way you try to down play how bad retail,economy really is.

"Sears fell apart while the economy was moving right along. Now the economy is at least slowing, possibly contracting or worse."

You really think besides yourself and MSF anyone with half a brain believes the economy is just now starting to fall apart!?Slowing is an understatement. We are in a full blown ression but only people with common sense know this.If you listen to our great elected officals thats the kinda crab they try to sneak by. If you want to blow economic smoke please at least run for elected office.Boy retailers selling china junk...........wow GEE let me see you ever walk in to a WAL_MART 80% of what they sell is CHINA junk I think they do ok.You look for any angle don't you,but nothing ever adds up. SEAR.com traffic grew by 40% (its traffic is now 3rd to amzn,wmt) that really proves your theory,look it up instead of making it up MORON!
Its been nice teaching you about investing again until next time.

[bulrun100]

CLOWNS!MORONS!(you know who you are).If the economy is not that bad and retailing is a SEARS only problem explain this?

finance.yahoo.com/q/bc...

Both good and not so good retailers.

[bulrun100]

Sometimes you have to educate the less fortunate.Going foward would you please educate the other investors instead of spreading lies.12yr olds can tell us stories but fact is all we want.
ticker 52week range %from high

SHLD 74.09 - 174.53 57.17%
LOW 19.94 - 32.53 29.82%
HD 23.77 - 41.01 35.99%
KSS 37.31 - 72.38 40.05%
JCP 33.27 - 76.99 52.10%
TGT 47.01 - 70.75 29.36%

[bulrun100]

J.C. Penney's (NYSE:JCP) comps dropped 7.4% in its first quarter, yet it was going up against a fairly tough comparable. In Q1 last year the company posted a 2.2% comp store increase.


Target's (NYSE:TGT) Q1 comps were down 0.7%. However, that's on top of a 4.3% comp store increase last year.
Perhaps it's the hardware section that is holding Sears back. The housing market has been in a tailspin for months now, and this has spilled over into other related sectors. The two giants of the hardware industry have seen a brutal decline in sales over the last year.

Lowe's (NYSE:LOW) saw its Q1 comps decline 8.4%. That's on top of a 6.3% decline in Q1 2007.


Home Depot's (NYSE:HD) Q1 comps declined 6.5%. That's on top of a 7.6% decline in Q1 2007.

[MSF]

Git,

Here is the problem Lampert has not done anything with the surplus of cash but buyback Sears stock at higher prices no less.

His hedge fund is ESL Investments and not Sears Holdings.

He does not get paid with Sears however,does with ESL and has made over a billion dollars one year from there.
So his trading and investing is focused on ESL where the money is.

What is Sear's holdings,,,,name them,,Kmart its brands,etc,,nothing really major but the obvious.

[MSF]

Remember these guys like Lampert are billionaires.
Sometimes they are out to prove something to themselves like turning businesses around etc.

Meanwhile they are hedged with investments and cash that should their goal not get achieved they are not effected becuase of their enormous wealth.

[MSF]

Bulrun please,simply why doesn't everyone in the investment world see this.
GS has a sell on Sears.
Buffett does not own a share.
Even the love bird Cramer said to sell.
Most that were bullish on Sears are eating tons of donuts now.

[MSF]

Some people can't even type on the computer they are so bloated never mind get up.

[MSF]

Sears stock price rose on the news that an average investor can buy into Sears and it would be like buying into Lampert's hedge fund without the large amount of cash.

After realizing this was not the case and he was actually trying to turn the retail around, and it was not working, investors starting selling off their shares.

Lampert not using the surplus of cash to invest but to buy more shares of Sears at higher prices really made the stock tank.

He also saying things are bad and not getting better and not providing any strategy or plan for the company makes you wonder who would invest in this company,.....oh because it is Eddie Lampert,,,,I don't think so.

Speaking to fellow investors they feel he does not have a plan and does not know what to do.

Forget about that nonsence on he is very secretive he does not have to say the strategy prior to when he is going to do it but after the results come out, however,no plan and nothing is working.

[MSF]

I must emphasise this again, Cramer has always said Sears is not only a retail play but on his show he recently said he likes other retailers and not Sears and that he is not confident in Sears.

He was pumping it all the way up to $180.

"LOSE MONEY'' STARRING JIM CRAMER

[JohnPseudonym]

Bulrun, you're an idiot...

"Slowing is an understatement."

I covered slowing to recession (worse) because if you ask 10 people you get 10 answers. The point is that Sears can't make money in good times, how will it make money in a recession?

>>>Boy retailers selling china junk...........wow GEE let me see you ever walk in to a WAL_MART 80% of what they sell is CHINA junk I think they do ok.>>>

Yeah, and Walmart is destroying them because Sears sells the same Chinese junk at 20 to 40% higher price.

You're not worth talking too. Keep investing your money in Sears, I'm sure someday the price will rise a little bit. Maybe they'll even turn it around and 10 years from now you'll get your money back.

[bulrun100]

DIDO CLOWN KEEP DEALING YOUR CRAP TO YOUR 5 YEAR OLD MAYBE HE'LL BUY IT!KEEP SHORTING AND TELLING STORIES INSTEAD OF BLOGING ANY FACTS.

[bulrun100]

LOL WHAT A JOKE!!!!!!!!!!!!!!!!!!...

[MSF]

TODD?

[MSF]

Todd how about those $80 calls from Berkowitz.

[MSF]

LOL

[MSF]

BULRUN take your medicine.

Todd this is your blog isn't it.

I have fallen and I can't get up.

[MSF]

BULRUN I FEEL FOR YOU.

[MSF]

HERG GREENBERG WAS CORRECT LAMPERT WORSE CEO OF THE YEAR.

HE WENT ONE ON ONE WITH CRAMER ON AN EPISODE AND HERB WAS RIGHT THE LOVE BIRD LOST.

[MSF]

Todd has given up,,,,Sears stock price is talking for you.

[MSF]

Maybe Sears should start selling cheeseburgers in their stores.

Since Lampert is trying anything.

[bulrun100]

MSF=SHUKA CON!!!SHUKA CON!!! THROW BACK FROM THE 80'S.MSF THAT'S HOW STUPID YOU AND GREENBERG ARE EDDIE ISN'T EVEN THE CEO!!!LOL!LOL!MSF GET OFF YOUR PARENT COMPUTER! STOP DAY DREAMING ABOUT BEING THIS GREAT INVESTMENT GURU!IF GREENBERG WOULD HAVE PREDICTED THE DOWN TURN OF THE US ECONOMY, HOUSING MARKET AND THE RETAIL SECTOR IT WOULD OF BEEN A GREAT CALL.

[JohnPseudonym]

6/23 Sears down $1.60 today. Time to buy more Bulrun

My money's on SDS. Have 20K with a cost of $56; I bought on the bounce off $55.

Today's price: $63.60

Profit $2713 in 6 weeks!

It's in a retirement account, so it's all profit:)

I'll take some off the table soon. If it breaks through 65, tests and holds above, I'm all in again.

[bulrun100]

GEE THAT'S NICE:)

[MSF]

Get your Sears' cheesburger here.

LOL

[MSF]

"LOSE MONEY'' WITH JIM CRAMER

[MSF]

Latest strategy LL Cool all decked out riding a lawn mower.

LOL what a joke.

Look out below.

I like the cheeseburger plan better.

[Kato1]

Okay...I challenge you all to keep track of analyst who one week say sell sell sell Sears. The next hold hold hold Sears, and the next buy, buy buy Sears. The only reason people get down on this stock is because either they want to see a quick buck, or they are short investors and not here for the long run. This is a "50+ billion dollar" a year business with little debt. Yes even with the poor quarters Sears continues to turn out profit. Maybe it's not in the investor's hands right now, but I believe in the long-term it will be a good investment. So shorts keep selling, and non-investors sell because you panic. I will hold my stocks for years to reap the rewards. You forget this is a company again which is re-growing. A few of the top people understand the company. Patience is a virtue.

[MSF]

Kato again why doesn't Buffett see this as well as the majority of the financiers.

I don't follow Cramer but read in a blog that he is a seller of Sears also.I focus on him because he pumped it so much up to $180 and that Lampert is his buddy pal,who cares,and now he is a seller too.

[MSF]

" LOSE MONEY " WITH JIM CRAMER

[Anthony123]

I'm looking at the part regarding the buyback. It says that a short squeeze would occur if Sears were to buy back $2.1 billion in stock. But isn't there only about $600 MILLION left of the buy back??