Transform Holdco and ESL Investments to Acquire Sears Hometown and Outlet Stores

June 3, 2019

Cleary Gottlieb is representing Transform Holdco LLC (Transform Holdco), the parent company of Sears and Kmart, as well as ESL Investments Inc. and its investment affiliates, including Eddie Lampert (collectively, ESL), in connection with Transform Holdco’s pending acquisition of Sears Hometown and Outlet Stores Inc. (SHOS).

ESL currently owns more than 58% of the outstanding shares of SHOS’s common stock and adopted the merger agreement by written consent on behalf of SHOS’s stockholders.

The transaction is structured as a one-step merger that provides SHOS with an opportunity to market and sell the Sears Outlet and Buddy’s Home Furnishing Stores segment of its business (together, the outlet segment) to a third party between signing and closing. Provided that a sale of the outlet segment occurs, at the closing of Transform Holdco’s acquisition of SHOS the net proceeds of such sale above a certain threshold will be distributed to non-ESL stockholders pro rata as an upward adjustment to the $2.25 per share base merger consideration.

The transaction was announced on June 3, 2019, and is expected to close in SHOS’s fiscal third quarter of 2019 subject to the satisfaction of customary closing conditions.