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Transformco

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Transform Holdco LLC.
Company typePrivate
IndustryRetail
Genre
PredecessorsSears Holdings Company
FoundedFebruary 11, 2019; 5 years ago (February 11, 2019)[1]
FounderEddie Lampert
Headquarters
Hoffman Estates, Illinois
,
U. S.
Number of locations
  • 425 (February 2019)[2]
  • 380 (October 2019)[3]
  • 290 (December 2019)[4]
  • 182 (February 2020)[5]
Areas served
Key people
  • Eddie Lampert (chairman)
  • Leena Munjal (Chief Digital Officer)
  • Greg Ladley (President of Apparel and Footwear)
  • Robert A. Riecker (CFO)
Revenue$3.9 billion[6] (2018)
OwnerESL Investments
Number of employees
45,000 (2019)[7]
Subsidiaries
Websitehttps://transformco.com/

Transform Holdco LLC (also known as TransformCo, referred to as "New Sears")[8] is an American privately held company formed on February 11, 2019, to acquire some of the assets of Sears Holdings Corporation. The new company is owned by Edward Lampert's ESL Investments hedge fund of Greenwich, Connecticut. Following the Chapter 11 bankruptcy filing of Sears Holdings on October 15, 2018, Transform Holdco LLC purchased the surviving assets owned by Sears Holdings for $5.2 billion.[1]

On June 3, 2019, it was announced that Transform Holdco LLC would acquire Sears Hometown and Outlet Stores. As per deal, they might need to divest its Sears Outlet division to gain approval.[9]

History

Background: Fall of Sears Holdings

Main article: Sears Holdings § History

On November 17, 2004, the management of Kmart Holding Corporation announced its intention to purchase Sears, Roebuck and Co. under a new corporation.[10] Kmart previously emerged from Chapter 11 bankruptcy protection on May 6, 2003. The new corporation became known as Sears Holdings Corporation, simply known as Sears Holdings. The new corporation announced that it would continue to operate stores under both the Sears and Kmart brands. The merger of Kmart and Sears closed on March 24, 2005, following affirmative shareholder votes of both companies. The result of the merger was Kmart and parent Kmart Holding Corporation and Sears became subsidiaries of the new Sears Holdings Corporation. Sears Holdings then operated Sears and Kmart stores. The company continued to market products under brands held by both companies. The merger was completed on March 24, 2005, after receiving regulatory approval from the government and approval by shareholders of both companies.[11] The combined company had approximately 3,500 stores at the time of the merger.[12]

Eddie Lampert led the company for the next thirteen years. (See Sears Holdings#History for more detailed history of the intervening years.)

On October 10, 2018, it was reported that Sears Holdings had engaged advisors regarding an imminent bankruptcy filing.[13][14]

The company filed for Chapter 11 bankruptcy protection on October 15, 2018, in New York; the same day that a $134 million debt payment was due.[15]

On October 15, 2018, Sears Holdings announced that it would close 142 stores, including 63 Kmart stores and 79 Sears stores.[15][16] Sears Holdings' bankruptcy also marked Kmart's second bankruptcy in 16 years. On November 8, 2018, Sears Holdings announced it would close an additional 40 stores, including 11 Kmart and 29 Sears stores.[17] On November 23, 2018, Sears Holdings released a list of 505 stores, including 239 Kmart and 266 Sears stores, that are for sale in the bankruptcy process while all others are currently holding liquidation sales.[18] However, the stores for sale are not guaranteed to be protected from liquidation in the future. On December 28, 2018, Sears Holdings announced it would close 80 additional stores, including 37 Kmart and 43 Sears stores.[19]

In a proposal announced in early January, Sears Holdings plans only to keep 202 Kmart stores along with 223 Sears stores open, assuming that it survives the bankruptcy process. Most of the proposed locations are in highly populated coastal regions.[20]

On January 15, 2019, when it had appeared that Sears Holdings was preparing to file for Chapter 7 liquidation, the bankruptcy court judge ordered the company to return to negotiation table and work out a new deal with Eddie Lampert to prevent the liquidation from occurring. A new deal was struck at the last minute that would keep up to 400 Sears and Kmart stores operating.[21] On January 19, 2019, Sears Holdings officially announced that they had won the auction, and that some of the then existing stores were to remain open.[22]

On January 24, 2019, a group of unsecured creditors, which included Simon Property Group, filed a motion with the bankruptcy court to overturn the deal Sears Holdings had recently made with Lampert claiming that Lampert had been "engaged in serial asset stripping" of the company at the expense of suppliers and landlords. The creditors had requested that the bankruptcy court rule to have the company be liquidated instead of being reorganized so that the creditors would be able to recover more money that was still owed to them.[23] On January 28, the federal government-operated Pension Benefit Guaranty Corporation announced that they were not in favor of the current Sears Holding agreement with Lampert since that agreement would create a $1.7 billion funding gap in the employee pension fund that would require the American tax-payers to cover the shortfall.[24] In papers filed on February 1 with the bankruptcy court, ESL "outlined plans to close three Kmart stores per month in 2019" if the court decides to accept ESL's purchase bid.[25]

In February 2019, it was announced that a U.S. bankruptcy judge approved the sale of the most lucrative part of Sears Holdings to Edward Lampert allowing the surviving part of the company that operates both Sears and Kmart to remain in business at the expense of suppliers, landlords, employees, pensioners, the U.S. government, and other creditors. Kmart would have 202 locations after the sale is completed.[26]

Birth of Transform Holdco

In February 2019, the company finalized the acquisition of 425 stores (223 Sears and 202 Kmart) from Sears Holdings for $5.2 billion. Stores not purchased by Transform were immediately liquidated.[1] During bankruptcy proceeding of Sears Holdings, ESL, the parent company of both "old Sears" and "new Sears", told the court that it had "plans to close three Kmart stores per month in 2019" if the court decides to accept ESL's purchase bid.[25][2]

On June 3, 2019, it was announced that Transform Holdco LLC would acquire Sears Hometown and Outlet Stores. As a part of the deal, Transform Holdco may need to divest its Sears Outlet division to gain regulatory approval.[9] At the time announcement, Sears Hometown and Outlet Stores had 491 Hometown stores and 126 Outlet stores in 49 states, Puerto Rico and Bermuda.[27] 98% of the Hometown stores are owner operated franchise operations.[28]

On October 23, 2019, Sears Hometown and Outlet Stores completed its sale of its Sears Outlet division to Franchise Group, Inc[29] while Transform Holdco completed the acquisition of the remainder of Sears Hometown at the end of the same business day.[30] Sears Hometown had 414 stores at the time of its acquisition by Transform Holdco in October 2019.[31]

In June 2019, Sears customers discovered that they are having a hard time getting warranties honored for items previously purchased from Sears.[32]

New store closures

On August 6, 2019, it was announced that Transform will be closing 26 stores, including 5 Kmarts and 21 Sears stores, in October. these closing would result in approximately 380 remaining stores.[3] On August 31, 2019, It was announced that Transform would close an additional 92 stores, including 77 Kmarts and 15 Sears stores, by the end of 2019.[4]

On November 7, 2019, it was announced that Transform would close an additional 96 stores, including 45 Kmarts and 51 Sears stores, February 2020, leaving 70 Kmart stores in 19 states, Guam, Puerto Rico, and United States Virgin Islands, and 123 Sears stores, respectively.[5] At least one source reported that Transform Holdco would have a total of 182 full Sears and Kmart stores remaining after the 96 announced stores were closed by February 2020.[31]

In December 2019, TransformCo sold the DieHard brand to Advance Auto Parts for $200 million.[33] Under this agreement, Sears and Kmart can continue to sell DieHard branded batteries through their stores while Advance Auto Parts has exclusive rights to the DieHard brand in the automotive and vehicular supplies and service industries.[34]

Subsidiaries

Main articles: Kmart and Sears

Current

Kmart division

  • Kmart – a chain of discount stores that are usually free-standing or located in strip malls. They carry most standard department store stock as well as a limited selection of grocery items.
    • Kmart stores – chain of discount department stores that are usually free-standing or located in strip malls.
    • Big Kmart stores – chain of discount department stores that carried everything a regular Kmart carries, but emphasizes home decor, children's clothing, and more food items such as meat and poultry, baked goods, frozen foods and an extended, but limited section of garden produce.

Sears division

  • Sears – a chain of department stores that are usually located in shopping malls, with a few freestanding locations. These stores carry traditional, middle-class priced department store items as well as an expanded appliance and tools section.
    • Sears Grand – a sub-chain of Sears stores, typically located away from shopping malls and arranged in a fashion similar to a big-box store. Many Sears Grand locations are retrofit remodels of existing Kmart or Sears stores in freestanding locations. They carry an expanded inventory, as compared with full-line Sears Department Stores, and can range from 165,000 to 210,000 square feet (15,300 to 19,500 m2).
    • Sears Home Services – a division of Sears that specializes in appliance repair, lawn and garden services, HVAC service, as well as most in home services. Sears Home Services can also do repair on small appliances in-store.[clarification needed]
    • Sears PartsDirect – a chain of lawn-and-garden equipment and appliances parts stores. Some stores, branded as Sears Parts and Repair Centers, feature a carry-in point for customers to bring merchandise in that needs to be repaired either in- or out-of- warranty.[clarification needed]
    • Sears Home & Life - a chain of stores that sells "hardline" goods such as appliances, tools, mattresses and lawn and garden equipment. These stores are free standing and are between 10,000 and 15,000 square feet in size.[clarification needed]
  • Sears Hometown and Outlet Stores - sells home appliances, lawn and garden equipment, apparel, mattresses, sporting goods, and tools. All stores in this division are individually owned and operated by independent franchisees.[9][35][36]
    • Sears Hometown Store - stores that sell Sears merchandise.
    • Sears Home Appliance Showroom - Home appliance showrooms display merchandise in-stores.

Other subsidiaries

  • DieHard Auto Center – launched in 2017, these full-service auto care centers are similar to Sears Auto Centers although they are not attached to Sears stores. Specialize in DieHard-branded auto products.[37][clarification needed]
  • Shop Your Way – a customer loyalty program shared between all subsidiaries.[clarification needed]
  • A&E Factory Service – a joint venture held by Whirlpool and Transform Holdco LLC that performs mobile appliance repairs.[clarification needed]
  • Wally Labs – a subsidiary created when Sears Holdings purchased the rights to WallyHome sensor technology from SNUPI Technologies in 2015.[clarification needed]
  • Monark Premium Appliances – a nationwide distributor of home appliances.[clarification needed]

Former

Kmart division

  • Kmart – Kmart closed down these divisions:
    • KGRO – a brand of Kmart that is used exclusively in each store's Garden Shop. While in the past it covered such things as KGRO garden and power equipment, today it still stands as Kmart's brand of fertilizers and plant seeds.
    • K-Fresh – a new format that was implemented in several Super Kmart Center locations, which extended the grocery section into a store-within-a-store model.
    • mygofer – a hybrid-online retail concept launched in spring of 2009, where products are ordered ahead of time and then are either shipped to the customer or held at a local Kmart for the customer to pick up.

Sears division

  • Sears – Sears closed down these divisions:
    • Sears Hometown and Outlet Stores
      • Sears Appliance and Hardware Store - Sears appliance and hardware stores were hardware stores that carry the entire line of Sears hardware and appliances. As of September 2019, there are no more locations left.[38]
      • Sears Outlet Stores - outlet version of Sears department stores located in various retail locations across the U.S., as well as online. Sold to Franchise Group, Inc in October 2019.[29][30]

Allied brands that are owned and operated by third parties

Independent companies that provide services under the Sears brand:

  • Sears Credit Card - Sears credit card and Sears MasterCard is owned and operated by Citibank since 2003.[39]
  • Sears Flowers - an online store that is owned and operated by Teleflora which sells Flowers, Plants and gifts for same day delivery via the Teleflora network.[40]
  • Sears Optical - is a licensed brand owned and operated by Luxottica. They provide Comprehensive Vision Exam, Pediatric Vision Exam, Contact Lenses (including astigmatism and bifocal contact lenses), Diagnostic and Medical Treatment of Eye Diseases, Urgent Care, Cataract and Glaucoma Surgery Consultation/referrals, Low Vision Treatment, Advanced Testing Instruments, Eyeglass Dispensary.[41]
  • Sears Travel - an online travel agency that is owned and operated by International Cruise & Excursion Gallery which provides online and telephone-based booking services for Sears customers through the SearsTravel.com website.[42]

Lawsuit

In March 2019, Sears Holdings sued Transform Holdco LLC for $57.5 million it says it is owed from the sale. Sears Holdings also says Transform owes it $41.3 million for credit card and cash transactions that occurred before the sale closed, as well as $16.2 million for a portion of February rent. A hearing on the matter was anticipated to take place on March 21, 2019, according to the court documents.[43]

References

  1. ^ a b c "ESL Investments Completes Acquisition of Sears Holdings' Assets". Business Wire (Press release). San Francisco: Berkshire Hathaway. February 11, 2019. Retrieved November 8, 2019.
  2. ^ a b Jones, Charisse (February 11, 2019). "Sears' controversial ex-chairman closes deal to buy the company, keeping 425 stores open". USA Today. McLean, Virginia: Gannett Company. Retrieved February 12, 2019.
  3. ^ a b Tyko, Kelly (August 6, 2019). "Sears and Kmart store closings: 26 stores to close in October". USA Today. McLean, Virginia: Gannett Company. Retrieved August 7, 2019.
  4. ^ a b Tyko, Kelly (August 31, 2019). "Kmart, Sears store closings: More locations to shutter by end of 2019". USA Today. McLean, Virginia: Gannett Company. Retrieved August 31, 2019.
  5. ^ a b Tyko, Kelly; Bomey, Nathan (November 7, 2019). "Sears and Kmart store closings: 51 Sears, 45 Kmart locations to shutter. See the list". USA Today. McLean, Virginia: Gannett Company. Retrieved November 7, 2019.
  6. ^ "Transform Holdco LLC". D&B Hoovers. Short Hills, New Jersey: Dun & Bradstreet. Retrieved November 10, 2019.
  7. ^ Wilkins, Rebecca Choong (February 9, 2019). "Jobs, Jobs, Jobs: Why Lampert's Bid Won Contest for Sears". Bloomberg News. New York City: Bloomberg L.P. Retrieved July 2, 2019.
  8. ^ Lampert, Edward (June 13, 2019). "The facts about the efforts to transform Sears Holdings". Medium. United States: A Medium Corporation. Retrieved November 10, 2019.
  9. ^ a b c "Sears Parent Co. Buying Sears Hometown And Outlet Stores". WBBM-TV. Chicago: CBS Corporation. June 3, 2019. Retrieved July 7, 2019.
  10. ^ Associated Press (November 17, 2004). "Kmart to acquire Sears in $11 billion dollar deal". NBC News. New York City: NBC. Retrieved November 8, 2019.
  11. ^ "Kmart Holding Corporation". U.S. Securities and Exchange Commission. Washington, D.C.: United States federal government. March 24, 2005. Retrieved November 8, 2019.
  12. ^ Bhatnagar, Parija (November 17, 2004). "The Kmart-Sears deal: Two of nation's oldest retailers set $11B merger. Will lower prices, better merchandise follow?". CNNMoney. Retrieved March 7, 2012.
  13. ^ Hirsch, Lauren; Thomas, Lauren (October 9, 2018). "Sears reportedly preparing for bankruptcy filing as soon as this week". CNBC. Englewood Cliffs, New Jersey: NBCUniversal Broadcast, Cable, Sports and News. Retrieved November 8, 2019.
  14. ^ DiNapoli, Jessica; Spector, Mike (October 10, 2018). "Sears prepares to file for bankruptcy in coming days: sources". Reuters. Canary Wharf, London: Thomson Reuters. Retrieved November 8, 2019.
  15. ^ a b Corkery, Michael (October 14, 2018). "Sears, the Original Everything Store, Files for Bankruptcy". The New York Times. New York City: The New York Times Company. Retrieved November 8, 2019.
  16. ^ Bomey, Nathan; Tyko, Kelly (October 15, 2018). "Sears store closing list: 142 more Sears, Kmart locations closing in Chapter 11 bankruptcy". USA Today.
  17. ^ Hirsch, Lauren Thomas, Lauren (November 8, 2018). "Sears to shut 40 more stores early next year". CNBC. Retrieved November 8, 2018.{{cite news}}: CS1 maint: multiple names: authors list (link)
  18. ^ "List Of Sears Stores To Be Sold And Other Bankruptcy Developments". Seeking Alpha. November 23, 2018. Retrieved November 24, 2018.
  19. ^ Thomas, Lauren (December 28, 2018). "Sears is closing 80 more stores in March, faces possible liquidation". CNBC. Retrieved December 28, 2018.
  20. ^ Isidore, Chris (January 7, 2019). "If Sears survives, this is what it will look like". CNN.
  21. ^ Hirsch, Lauren (January 15, 2019). "Sears reaches deal with Chairman Eddie Lampert to save company and roughly 400 stores". CNBC.
  22. ^ "Sears Holdings Announces ESL Investments As Winning Bidder In Bankruptcy Court-Supervised Auction". Sears Holdings Corporation (Press release). January 17, 2019 – via PR Newswire.
  23. ^ Bomey, Nathan (January 24, 2019). "Ex-Sears CEO Eddie Lampert orchestrated 'scheme' to 'steal' Sears, creditors allege". USA Today.
  24. ^ Siegel, Rachel (January 28, 2019). "CEO's latest bid to save Sears would leave pensioners high and dry, government says". Washington Post.
  25. ^ a b Zumbach, Lauren; Elejalde-Ruiz, Alexia (February 4, 2019). "Sears bankruptcy watch: A showdown in court focuses on lost jobs". Chicago Tribune. {{cite news}}: Unknown parameter |last-author-amp= ignored (|name-list-style= suggested) (help)
  26. ^ Hirsch, Lauren (February 7, 2019). "Eddie Lampert's deal to buy Sears granted approval, as retailer is given a second life". CNBC.
  27. ^ Finaldi, Laura (July 26, 2019). "Sears is coming back to Manatee County ... kind of". Ocala Star-Banner.
  28. ^ "Why Open a Saars Retail Store Franchise". Sears Hometown and Outlet Stores.
  29. ^ a b Kaminsky, Andrew F. (October 23, 2019). "Franchise Group, Inc. Closes on the Acquisition of the Sears Outlet Business from Sears Hometown and Outlet Stores, Inc". GlobeNewswire. Los Angeles: West Corporation. Retrieved November 12, 2019.
  30. ^ a b Aycock, Jason (October 23, 2019). "Sears Hometown and Outlet +2.7% after merger transaction". Seeking Alpha. Ra'anana: Seeking Alpha Ltd. Retrieved November 12, 2019.
  31. ^ a b Spector, Mike; DiNapoli, Jessica (November 7, 2019). "Exclusive: Sears says it has secured a $250 million lifeline, will close 96 stores". Reuters. {{cite news}}: Unknown parameter |last-author-amp= ignored (|name-list-style= suggested) (help)
  32. ^ Matarese, John (June 18, 2019). "Sears customers wonder how to get warranty help: Woman finds no Sears auto centers within 2-hour drive". WCPO-TV.
  33. ^ Tyko, Kelly (December 23, 2019). "Sears sells DieHard brand to Advance Auto Parts for $200 million". USA Today.
  34. ^ "Advance Auto Parts Announces Purchase of the DieHard Brand from Transformco". Transformco (Press release). December 23, 2019.
  35. ^ Pete, Joseph S. (April 15, 2014). "New owners buy Sears Outlet Store in Portage". The Times of Northwest Indiana. Munster, Indiana: Lee Enterprises]. Retrieved November 7, 2019.
  36. ^ "Worth noting in business: Sears Outlet store opens on White Lane". The Bakersfield Californian. Bakersfield, California: Sound News Media, Inc. February 10, 2014. Retrieved November 7, 2019.
  37. ^ Hernandez McGavin, Stephanie (February 21, 2017). "Sears launches free-standing pilot DieHard Auto Center". Automotive News.
  38. ^ "Sears Hardware Stores Store List". Sears Hardware Stores. Retrieved November 7, 2019.
  39. ^ Sorkin, Andrew Ross (July 16, 2003). "Sears to Sell Card Portfolio To Citigroup For $3 Billion". The New York Times.
  40. ^ "About Teleflora". Sears Flowers.
  41. ^ "Sears Optical and Target Optical". Luxottica. With the acquisition of Cole National in 2004, Sears Optical and Target Optical, both licensed brands operating within their host stores, became part of the Luxottica retail network.
  42. ^ "Welcome Sears Travel". Sears Travel. © 2019 Sears Travel. International Cruise & Excursion Gallery, Inc., d.b.a. Sears Travel, is a Registered Seller of Travel.
  43. ^ "'Old Sears' sues 'new Sears'". Retail Dive. Retrieved March 16, 2019.


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