Would A Leveraged Buyout Help Sears Turnaround Its Business?

Practically since the day he took the reins at Sears, CEO and Chairman Eddie Lampert has been steadily stripping the once mighty retailing behemoth of assets and protecting his hedge fund’s investment as the company continues its steady march toward bankruptcy.

Any customer with the temerity to visit one of the remaining Sears or K-Mart stores will be greeted with the same depressing vision: Shelves that are mostly vacant of the most popular consumer brands, as many of Sears’ suppliers have become wary of working with the company. Displays are unkempt, and even the selection of appliances that were once Sears’ bread and butter has been dramatically reduced.

Back in October, Sears Canada announced its plans to liquidate, leaving behind only this video to remind investors and customers just how bad things got before the plug was pulled.

But despite all of this, Swiss asset manager Memento, a firm that primarily manages assets belonging to Switzerland’s Spadone family, believes the short-selling of Sears’ stock is the most pressing obstacle plaguing the floundering retailer.

And according to Bloomberg, Memento has a solution that would doubtlessly pique its current owners’ interest: To wit, Memento believes Sears could thrive under private ownership – that’s right: Their solution to Sears’ myriad structural and external problems is a simple 1980s-style leveraged buyout.

Despite the seemingly insurmountable obstacles facing a Sears comeback recommended the retailer consider going private, saying that “excessive” short selling has hammered the stock.

The firm, which serves as investment manager for Switzerland’s Spadone family, also called for an investigation into recent surges in short selling. Memento said in an open letter to Sears’s board that it owns nearly 2 million shares and believes in the long-term value of its stores, brands and employees.


“Sears has the potential for strong financial performance once it addresses a few critical concerns including, among others, the high volume of short-selling activity in its shares,” Memento Chief Executive Officer Alessandro Mauceri said in the letter.


Through Memento is a relatively small investor in Sears, the idea of going private brought a spark of optimism to the battered stock on Thursday. It climbed as much as 5.1 percent to $4.35.

Memento is seeking a “constructive dialogue” with Lampert & Co. to discuss the pressing issue of whether the company is presently doing enough to fend off the short sellers who have hammered its shares.

Memento is seeking a “constructive dialogue” with Sears’s board and management. The firm is working with law firm Olshan Frome Wolosky LLP on the effort.


Mauceri also urged Sears to form an independent board committee to safeguard the equity ownership interests of its investors. He also called for the Securities and Exchange Commission to investigate whether Sears’s short sellers - who place bets that shares will go down - violated regulations. In the meantime, he says the SEC should temporarily halt short selling in the stock.


Short interest as a percentage of total outstanding Sears shares has risen to almost 49 percent from about 44 percent two months ago, according to data from financial analytics firm S3 Partners. Short sellers borrow shares, sell them, buy them back at a lower price and profit from the difference -- unless the stock rises.


Memento wants Sears to provide “adequate assurances that it is taking the steps necessary to effectively address the urgent problem of naked short selling in its shares by establishing sophisticated internal controls and seeking appropriate regulatory action,” Mauceri said.

After a recent $900 million sale of its Craftsman brand, store closures and other cost cuts, Sears warned in March that there’s “substantial doubt” the company will survive.

And any veteran retail analysts seem to agree, citing same-store sales and profits that have been spiraling lower for years.

"There is no turnaround in progress now and there never will be a turnaround in the future," said Mark A. Cohen, director of Retail Studies at Columbia University’s Graduate School of Business and a fellow Forbes contributor.


"This perversion of a public company will remain propped up as long as Lampert can continue to strip it,” according to Forbes.

Given the company's otherwise-imminent demise, we imagine Lampert & Co. will be curious to hear Memento's offer.


Ignatius bamawatson Thu, 12/07/2017 - 15:53 Permalink

Sears should have seen what Amazon was up to and taken them head on.Now they're playing catch up from bankruptcy.Sears -- if you're listening -- put enough cash on the table and I'll come out of retirement.  If not me, then somebody with a plan and some vision.

In reply to by bamawatson

Endgame Napoleon Ignatius Thu, 12/07/2017 - 16:05 Permalink

Sears should go back to its roots, selling build-it-yourself home kits in fashionable styles, not cheesy styles. Maybe, they should do it online, rather than issuing a physical catalog, making the kits highly shippable, like Ikea products, but using a site with a vintage feel. We need some truly small, truly affordable and truly style-worthy houses for the Millennials and other under-housed groups that do not require a lot of debt-based-financing.

In reply to by Ignatius

RedBaron616 fauxhammer Thu, 12/07/2017 - 16:01 Permalink

Actually, that was the very, very beginning of the end. They tried going high brow and putting the prices up there as well. Remember when they wouldn't take any credit cards but Sears? Arrogant idiots. My parents used to buy all my clothes there. After that, they went elsewhere and never came back. The beginning of the end of most businesses is this idea that we need them more than they need us. Nothing could be further from the truth.

In reply to by fauxhammer

Endgame Napoleon any_mouse Thu, 12/07/2017 - 16:12 Permalink

The catalogs I am talking about predate even us old Gen Xers. I mean the ones that helped spawn the Craftsman house movement. The Arts and Crafts Movement in America was actually helped along by Sears. Lots of people have made bank on that Craftsman style craze in recent decades, not Sears, though, despite its historical role. Maybe, they could get Stickley to let them link to their stuff, providing an upscale decor connection for buyers who could afford a little more. Maybe, they could sell a line of Stickley’s 100% Made-in-the-USA products.

In reply to by any_mouse

83_vf_1100_c any_mouse Thu, 12/07/2017 - 18:22 Permalink

  Tools and appliances were the main draw. Craftsman tools are dead to me, You can pick up one of my 40 yr old Craftsman wrenches and a brand new Crapsman wrench and the quality drop is glaring to a non mechanic. I can buy cheap chinesium steel at Harbor Freight and frankly they are better stampings than the current Crapsman stuff.  I have 20 yr old HF chinesium combo wrenches hanging on the shop wall that have been used a lot and they look and function well.  When Sears dropped the Craftsman quality and no hassle warranty I was done with Sears. When the wife wanted to go shopping I was ok with going to sears, cuz tools. No longer.  They made big money off revolving in dtore credit, modern credit hurt that biz model. No catalog, more hurt.  Amazon and WalMart came along and Sears did not adapt. Wall St scum feeding on them is just the final nail. Life goes on.

In reply to by any_mouse

Old Hippie Patriot Thu, 12/07/2017 - 15:39 Permalink

It would be very saddening to see Sears go down. It was the equivalent of Amazon. An American institution and every family had a Sears catalog. It shipped civilization to the wild hinderlands of America. What is needed is management that is loyal to their companies, their workers and America.

adr Thu, 12/07/2017 - 15:44 Permalink

When you walk into a Sears you feel like you are going back to the 1970s. The store design and appearance hasn't changed in over 30 years and it is depressing to walk through it.Macy's and JC Penney have nice looking departments and designed ceilings and columns. Sears looks like a warehouse building filled with shitty racks and industrial shelves.Sears could be saved but it would require renovating every store from floor to ceiling and tossing every product line they have. I don't think there is the will to do so, so they are dead.

izzee Thu, 12/07/2017 - 16:03 Permalink

Eddie destroyed Sears, just like Jeff Immelt Destroyed General Electric.Once Upon a Time, you could buy a house kit from Sears.  In the Hudson River town, where I grew up in Westchester County New York, there were dozens of Craftsman House - pre cut everything delivered to your lot,  that were put up by the HomeOwner in the 1930's. $2K to 8K  These houses are now worth $750K +++ , because they are solid homes built with real wood.I've got Craftsman tools that I bought in the 1970s, US made, not the Chinese crap that Sears now sells "branded" as Craftsman.My kitchen has fully functional GE appliances from the early 80's, which in 30 years have only needed minor part replacements.  Nothing beyond a DY repair. I know several people who have spent well over $1K for a refrigerator that failed in two years, and was too expensive to repair.  LAND FILL.  dual door, ice maker, chilled water,

Anteater izzee Thu, 12/07/2017 - 18:11 Permalink

My landlord had one of those refrigerators, quietly drippingin back out the waterline to the ice cube maker. One morningthere was a big thump, and the feet had punched on throughthe cheap soaked particle board flooring under the linoleum.So I got a months rent for drying, reflooring and tiling underthe same crappy refrigerator,  now without an ice maker, lol.Who builds houses with particle board floors!!? Jesus H God.Sears is a symptom, not the disease. The disease is ((debt)).America needs a new Pearl Harbor Three. Happy Hanukkah!

In reply to by izzee

Pernicious Gol… Thu, 12/07/2017 - 15:54 Permalink

I'm an uneducated slob. If I had an MBA I'm sure I would see immediately that taking a failing company private and loading it up with debt is a great idea.But I do wonder whether the family is doing a head fake so they can bump the stock price and sell quickly.

any_mouse Thu, 12/07/2017 - 15:58 Permalink

Yes, short selling is the root of Sears' problems as a retailer in the Amazon/China era.

Sears is not Sears any longer. That is the problem.

Is Monkey Ward still around?

Why is Sears no longer Sears? China and Federal Reserve Notes. The end of Gold backed fiat.

Quality at affordable prices does not make short term gains.

Must hide the decline.

rejected Thu, 12/07/2017 - 15:59 Permalink

It's all Amazondotcon's fault.           [in a deep clueless mentally retarded voice]Cheapo foreign shit and free shipping for a hundred bucks to your door. You don't even need to be dressed in those PJ's you wear to Wally World.What a great time to live!

pitz Thu, 12/07/2017 - 16:04 Permalink

Having the perfume counter at the front door meant that I, and a good chunk of my family, physically could not tolerate even setting foot in their stores.  

RedBaron616 Thu, 12/07/2017 - 16:06 Permalink

"This perversion of a public company will remain propped up as long as Lampert can continue to strip it."I think that summed it up nicely. Lampert, despite his protests, doesn't give a crap about Sears. Actions speak louder than words. He will come out smelling like a rose financially.

rf80412 Thu, 12/07/2017 - 16:16 Permalink

Sears needs to dump the sick corporate culture that has all the company's divisions treating each other as competitors - lying and backstabbing to be the one who gets the money from HQ - a culture that is made to trickle down to employees in an individual store, who don't act as a team but instead are each trying to get their own personal numbers up, and it's customer service that suffers.

Captain Nemo d… Thu, 12/07/2017 - 16:22 Permalink

Instead of leverage they need buoyancy ... which can be obtained by getting out of the bathtub, not getting dressed, and running around the street shouting "eureka" "eureka".

CRM114 Thu, 12/07/2017 - 16:42 Permalink

The management are f#cking idiots, it's as simple as that. They haven't a clue how to run a retail business, and don't give a toss about anyone but themselves. Target's the same; I had an interesting 'plane ride chatting to a woman who used to attend their board meetings sometimes. It's a self-obsessed echo chamber with no clue what happens on the retail floor.