Sears Holdings Corp. was sued Friday by a shareholder that said the company’s plan to sell 254 Sears stores to a Real Estate Investment Trust (REIT) would benefit billionaire chairman and CEO Eddie Lampert at the expense of investors.
The class-action lawsuit, filed in Delaware Chancery Court on behalf of Sears shareholder John Solak by San Diego-based law firm Robbins Arroyo, seeks to stop the $2.5 billion sale to Seritage Growth Properties, the Lampert-controlled, Maryland-based REIT. Lampert, Sears Holdings, Sears board members and Seritage are named as defendants in the suit.
“The proposed transaction is a financially and structurally unfair deal,” the lawsuit says. “Sears and its stockholders would receive a severely inadequate cash payment that the defendant Lampert-controlled company may use to cover operating losses and debt obligations for another year or so, before stockholders are left holding the bag in an insolvency widely viewed as inevitable if the proposed transaction occurs.”
After reporting its fourth straight year of falling profit and revenue, Sears Holdings announced its plan in April to sell 250-plus stores to the REIT and lease them back in an effort to unlock the value of Sears’ real estate for its shareholders. The sale is scheduled to close this month. In addition, the company entered into joint-venture agreements with mall owners Macerich, General Growth Properties and Simon Property Group to sell and lease back stores in exchange for cash and 50 percent ownership.
“The complaint contains numerous factual misstatements and is legally without merit,” Chris Brathwaite, a Sears spokesman, said in a statement to the Chicago Tribune. “The company plans to contest it vigorously and believes the proposed real estate investment trust transaction will provide substantial benefits to Sear Holdings and its shareholders.”
Sears Holdings shuttered 234 under-performing Kmart and Sears locations last year in an effort to shore up finances, bringing its count to 1,725 stores as of the fiscal year ended January 2015, down 29 percent from the 2,429 stores it reported in fiscal 2013. Last month Lampert noted the retailer planned to close more stores this year.