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Eddie Lampert offers to garrote his own company

Longtime readers know how much I loathe Eddie Lampert for what he did to Sears and for how perfectly he demonstrates the dangers of slavishly following a philosophy that owes a lot to the thought processes of adolescent boys.

Well, my longtime predictions seem to be coming true. Lampert has offered to buy the best bits of Sears (i.e., its real estate and Kenmore brand), which would quickly kill the company. Crain's Joe Cahill outlines some of the offal in this awful person's proposal:

It's not clear, however, just what Lampert is willing to pay. The offer letter indicates the transaction should reflect an enterprise value of $500 million for the home improvement and parts businesses, but doesn't put a price on Kenmore or the real estate, beyond confirming Lampert would assume $1.2 billion in real estate debt. The letter further proposes that the asset sale take place in conjunction with offers by Sears to convert some of its debt into equity and buy back or exchange for equity another slug of outstanding debt. Lampert indicates a willingness to "consider participating in such exchange offer and tender offer," which might increase his equity interest in Sears.

The complex and somewhat vague proposal raises questions about Lampert's many hats at Sears—he's the controlling shareholder, CEO, a major creditor, and—if this transaction goes through—a buyer of key company assets. Let's focus on his role as CEO, where his job is to generate maximum returns on company assets, either through business operations or by selling them for the highest possible price. His offer letter implicitly confirms that he's been unable to do either with Kenmore. Yet he evidently believes he could squeeze strong returns out of the brand if he owned it separately from Sears. Otherwise, buying it would make no financial sense for Lampert and any fellow investors in the proposed asset purchase.

Understandably, this disconnect fuels a growing perception that Lampert is cherry-picking company assets ahead of a potential bankruptcy filing that likely would leave Sears shareholders with little or nothing. Already, a real estate investment trust formed by Lampert has acquired many of Sears' store locations with the intention of remarketing them to higher-paying tenants. "There's a very legitimate case to say he's screwed up the company and now he's trying to take the crown jewels," says Nell Minow, a corporate governance expert with Value Edge Advisors.

No kidding. Thanks, Eddie.

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