All-Cash Transaction Will Reunite the Sears Family of
Stores
Acquisition is Subject to a Marketing Process and Potential
Premerger Sale of Outlet Segment to a Third Party
HOFFMAN ESTATES, Ill.,
June 3, 2019 /PRNewswire/
-- Transform Holdco LLC ("Transform" or "the new Sears"), a
leading integrated retailer and home to Sears and Kmart, and Sears
Hometown and Outlet Stores, Inc. ("Sears Hometown") (NASDAQ: SHOS)
today announced that they have entered into a definitive merger
agreement whereby Transform will acquire the outstanding shares of
Sears Hometown not owned by ESL Investments, Inc. and its
affiliates for a price of $2.25 per
share in cash, subject to an upward adjustment in the event a sale
of Sears Hometown's Outlet Segment has occurred that satisfies
criteria specified in the merger agreement. ESL Investments, Inc.
and its affiliates, the majority owners of Transform, presently
hold 58% of the outstanding shares of Sears Hometown.
The transaction will reunite Sears and Kmart with Sears
Hometown, which was spun off from Sears Holdings Corporation, the
former parent company of Sears and Kmart, in 2012. Having these
businesses under common ownership will accelerate Transform's
strategy of growing its smaller store format by adding Sears
Hometown stores. It will also expand the company's footprint as a
multi-channel business that can serve customers through a variety
of shopping experiences to meet their needs, provide growth for
Transform's marquee brands, including Kenmore® and DieHard®, and
increase opportunities for Sears Home Services and Financial
Services businesses, as well as the Shop Your Way® social shopping
destination and rewards program.
Edward S. Lampert, Chairman of
Transform, said, "We are excited to bring Sears Hometown, its
associates and network of independent dealers and franchisees back
into the Sears and Kmart family. Our investment demonstrates our
commitment to growing Transform for the benefit of our members and
customers, associates, vendors and communities across the country.
While, initially, the companies will operate independently, we see
many opportunities where we can partner to serve our customers
better and enjoy efficiencies of scale once these businesses are
under one roof."
Will Powell, Chief Executive
Officer and President of Sears Hometown and Outlet Stores, said, "I
believe this is the best path forward for Sears Hometown and serves
the interests of all our constituents, including our customers,
associates, dealers, franchisees and stockholders. We believe that
reuniting our Sears Hometown segment stores with Transform's Sears
full-line stores will result in a more consistent customer
experience across Sears branded storefronts, generate higher total
revenues and leverage efficiencies of scale to improve costs and
margins, all of which could lead to improved profitability for
Sears Hometown's dealers and franchisees."
Sears Hometown presently maintains a network of 491 Hometown
stores and 126 Outlet stores located in 49 states, Puerto Rico and Bermuda and generated $1.4 billion in net sales in 2018. When the two
companies are combined, they will rank as the third largest
appliance retailer in the United
States in terms of sales.
Under the terms of the merger agreement, Sears Hometown has a
specified period of time in which it can market and sell its Sears
Outlet and Buddy's Home Furnishing Stores businesses (together, the
"Outlet Segment") to a third party for not less than $97.5 million. If the Outlet Segment is sold in
accordance with the terms of the merger agreement, it will not be
acquired by Transform in the acquisition of Sears
Hometown.
At the completion of the acquisition of Sears Hometown, each
share of Sears Hometown's outstanding common stock not owned by ESL
Investments, Inc. and its affiliates will be converted into the
right to receive a base amount in cash equal to $2.25 per share. If Sears Hometown completes a
sale of the Outlet Segment in accordance with the terms of the
merger agreement, this base amount will be subject to an upward
adjustment equal to (i) the excess, if any, of the net proceeds
received by Sears Hometown as a result of any sale of the Outlet
Segment over $97.5 million, divided
by (ii) the aggregate number of shares of Sears Hometown common
stock and unvested Sears Hometown restricted stock units issued and
outstanding as of the closing of the merger transaction. Sears
Hometown must enter into an agreement to sell the Outlet Segment no
later than August 24, 2019
(extendable by 10 days in specified circumstances) and the sale
must be completed by October 23, 2019
(extendable by 15 days in specified circumstances). Under the terms
of the Merger Agreement, Transform will have the opportunity to
match the economic terms of any proposed sale of the Outlet Segment
to a third party that is expected to result in net proceeds to
Sears Hometown of less than $120
million.
Will Powell, Chief Executive
Officer and President of Sears Hometown and Outlet Stores, said,
"As we have been publicly reporting, the Outlet business is
profitable and has a unique business strategy which should enable
further growth. We are now beginning the Outlet Segment sale
process with interested parties, while continuing to operate the
Outlet stores without any business interruption."
"We will work with Transform over the coming months to ensure
that our dealer network is in a position to leverage the best of
Transform's unique brands, services and online capabilities to
bring additional value to their customers."
The transaction was negotiated and approved by a special
committee of Sears Hometown's board of directors, consisting of an
independent and disinterested director.
The closing of the transaction is expected to take place in
Sears Hometown's third quarter of 2019, at which time Sears
Hometown will cease to be a publicly-held corporation.
Cleary Gottlieb Steen &
Hamilton LLP is serving as legal counsel for Transform Holdco LLC.
Shearman & Sterling LLP is serving as legal counsel and PJ
SOLOMON is serving as financial advisor for Sears Hometown's
special committee.
About Transform Holdco LLC
Transform Holdco LLC is a
leading integrated retailer focused on seamlessly connecting the
digital and physical shopping experiences to serve its members –
wherever, whenever and however they want to shop. Transform Holdco
is home to Shop Your Way®, a social shopping platform offering
members rewards for shopping at Sears, Kmart and other retail
partners. Transform Holdco operates through its subsidiaries with
full-line and specialty retail stores across the United States.
About Sears Hometown and Outlet Stores, Inc.
Sears
Hometown and Outlet Stores, Inc. is a national retailer primarily
focused on selling home appliances, hardware, tools and lawn and
garden equipment. Its Hometown stores (which includes its Hometown
Stores, its Hardware Stores, and its Home Appliance Showrooms) are
designed to provide its customers with in-store and online access
to a wide selection of national brands of home appliances, tools,
lawn and garden equipment, sporting goods and household goods,
depending on the particular format. More than 90% of its Hometown
Stores are operated by independent local dealers or
franchisees.
Its Outlet stores are designed to provide its customers with
in-store and online access to new, one-of-a kind, out-of-carton,
discontinued, reconditioned, overstocked, and scratched and dented
products across a broad assortment of merchandise categories,
including home appliances, lawn and garden equipment, apparel,
mattresses, sporting goods and tools at prices that are
significantly lower than list prices.
Forward-Looking Statements:
This new release contains forward-looking statements. Statements
preceded or followed by, or that otherwise include, the words
"believes," "expects," "anticipates," "intends," "project,"
"estimates," "plans," "forecast," "is likely to," "and similar
expressions or future or conditional verbs such as "will," "may,"
"would," "should," and "could" are generally forward-looking in
nature and not historical facts. The forward-looking statements are
subject to significant risks, uncertainties and assumptions,
including, but not limited to, the requirement to satisfy closing
conditions as set forth in the merger agreement, the outcome of any
legal proceedings that may be instituted against Sears Hometown and
others related to the transaction, and the ability to retain
specified key employees of Sears Hometown, that may, individually
or in the aggregate, cause actual results, performance, and
achievements in the future to be materially different from the
future results, future performance, and future achievements
expressed or implied by the forward-looking statements. The
forward-looking statements include, without limitation, information
concerning future financial performance, business strategies,
plans, goals, beliefs, expectations, and objectives. The
forward-looking statements are based upon the current beliefs and
expectations of the parties and should be read in conjunction with
the other cautionary statements, including "Risk Factors," that are
included in Sears Hometown's Annual Report on Form 10-K for its
fiscal year ended February 2, 2019
and in its other filings with the Securities and Exchange
Commission and its other public announcements. While the parties
believe that their forecasts and assumptions are reasonable, they
caution that actual results may differ materially. If one or more
of these or other risks or uncertainties materialize, or if the
parties' underlying assumptions prove to be incorrect, actual
results may vary materially from what it projected. Consequently,
actual events and results may vary significantly from those
included in or contemplated or implied by any forward-looking
statements.
The forward-looking statements included in this news release are
made only as of the date of this new release. The parties undertake
no obligation to publicly update or review any forward-looking
statement made by them or on their behalf, whether as a result of
new information, future developments, subsequent events or
circumstances, or otherwise, except as required by law.
Additional Information and Where to Find It
This new release is being made in respect of the proposed merger
involving Sears Hometown and Transform. Sears Hometown will prepare
an information statement for its stockholders containing the
information with respect to the merger specified in Schedule 14C
promulgated under the Securities Exchange Act of 1934, as amended,
and describing the merger. When completed, a definitive information
statement will be mailed to Sears Hometown's stockholders.
Investors are urged to carefully read the information statement
regarding the merger and any other relevant documents in their
entirety when they become available because they will contain
important information about the merger. You may obtain copies of
all documents filed with the SEC regarding the merger, free of
charge, at the SEC's website, http://www.sec.gov, or from Sears
Hometown by directing a request by mail or telephone to Sears
Hometown and Outlet Stores, Inc. at 5500 Trillium Boulevard, Suite
501 Hoffman Estates, Illinois
60192, telephone (847) 286-7000, Attention: General Counsel.
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SOURCE Transform Holdco, LLC