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REIT's move may have spurred Lampert to act
Vornado Realty Trust's unexpected disclosure that it had acquired a significant stake in Sears, Roebuck and Co. may have kick-started investor Edward Lampert's plan to merge the company with his Kmart Holding Corp.
"Vornado's purchase stimulated activity on the part of Eddie Lampert and Kmart, bringing to a head what might have otherwise been a longer-term plan," speculated Marshall Eisenberg, a partner in Chicago law firm Neal, Gerber & Eisenberg LLP.
The merger talks began after Sears earlier this year agreed to buy 50 Kmart stores, Sears Chairman and Chief Executive Alan Lacy said during a news conference Wednesday. Lampert, Kmart's chairman and Sears' largest shareholder, said he has not been working with Vornado on Sears.
So Lampert might have been surprised Nov. 5 when the New York-based real estate investment trust said it had accumulated a 4.3 percent stake in the slumping Hoffman Estates-based retailer. Lampert, who is also chairman of Connecticut hedge fund ESL Investments Inc., has a 15 percent stake in Sears.
The REIT, which began buying Sears stock in July, was not required to disclose the reason for its investment, but this year Vornado unsuccessfully bid on Mervyn's LLC, a California department store chain.
Vornado's investment and the Mervyn's deal reflect the way some investors are valuing struggling retailers more for their real estate than their sales.
And for the Kmart-Sears talks, Eisenberg said, Vornado's presence created the possibility that a third party would step in and make a bid for Sears, which could have added sudden urgency to the discussions.
The merger would give Sears' shareholders the option to receive $50 in cash or a half-share of the new combined company. Shares of Kmart closed Wednesday at $109.
Based on Sears closing stock price Wednesday of $52.99, the value of Vornado's stake has risen 42.5 percent, to more than $480 million, since the day before it disclosed its investment two weeks ago.
A spokeswoman for the REIT declined to comment about the merger, except to say, "It's a good result for Vornado."