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GE to Sell Appliance Unit
Sectors: Aerospace
, Finance
Symbols: ESL, GS, HD, LOW, SHLD, WHR
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Lampert has a $4 billion credit line and that is unused and about $1 billion in cash at Sears Holdings (SHLD). While an outright purchase may not be in the cards, Lampert could easily take a large piece of the unit and turn Sears, already the nations largest seller of appliances into it's largest producer also.
The GE (GE) unit is expected to garner between $5 and $8 billion. GE is currently the second-largest producer of appliances sold, after Whirlpool (WHR), which bought Maytag in 2006 for $1.7 billion.
According to the Journal, "GE has hired Goldman Sachs Group Inc. to run an auction for the appliances unit. It's unclear who might be interested in bidding this early in the process. But possible buyers for the division include appliance makers BSH Boschv (BCFHF) & Siemens (SI) Hausgeräte GmbH of Germany and Haier Group (HRELF) of China, bankers said. Private-equity firms and GE's Mexican partner, Controladora Mabe SA, could also be interested, they said."
Why not buy it all? Technically he could but, Lampert is not one to leverage up a balance sheet and buying the whole company would do just that. The timing of it, with the current retail environment would make things a bit tight. It has to be tempting though. With the current logical push into brands, adding the GE line to the stable would be very exciting. Let's also not forget that the price it will sell at today is far less than what it would have sold for even a year ago.
It would also give the company tremendous bargaining power when dealing with retailers like Home Depot (HD) and Lowe's (LOW). Antitrust concerns ought not be an issue considering the Whirlpool and Maytag merger was approved. There is still plenty of international competition, including the above named potential suitors.
We must assume Whirlpool as a bidder is out simply because the deal would never get by regulators. Private equity may not be there simply because of the debt markets. That does give the advantage to strategic buyers of which Sears is one. That also means fewer bids at the auction and because of it a lower price.
This may be then perfect time for Lampert. Perhaps his hedge funds ESL or RBS Partners could take a stake with Sears? That way Lampert has total control of the unit and Sears does not take on too much debt. Then as the retail environment improves, Sears could buy the rest from him down the road.
Just a thought....
Disclosure ("none" means no position):Long SHLD, none
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