Sears Holdings (ticker SHLD) today announced that it has made an offer to buy Target (ticker TGT) for $55 per share, which represents a baffling 12% discount to Target’s current price. Given that Sears goes through cash the way Charlie Sheen goes through call girls, it’s entirely unclear how Sears will finance this transaction. With respect to the source of funds, Sears CEO Ed Lampert, whose early-career stock-picking prowess has now been completely eclipsed by his destruction of an American retail icon, said, “If I can sweet-talk a bunch of kidnapping thugs, then I’ll have Brian Cornell [Target CEO] begging to be a check-out girl.” When asked about the curious discount on his offer price, Lampert blithely remarked, “Sears is the Goldman Sachs of the department store sector, and I’m sure that Target’s board will recognize that the chance to become associated with Sears/K-Mart justifies a small discount to the purchase price.” Lampert explicitly stated that he will change all Target stores to the K-Mart nameplate. Lampert worked at Goldman earlier in his career.
Lampert’s confidence about finding the money to consummate the takeover revolves around synergies that he suggests are “low hanging fruit.” Walking the aisles of the less-than-pristine K-Mart in Hamilton, NJ with this reporter (the outside of the store looks a bit like the methadone clinic on Perry Street in downtown Trenton), Lampert mused, “Here’s an immediate cash saver…do you notice how we don’t have the lights on during the daytime in the store? It’s still plenty bright, so we’ll keep the lights off at the former Target locations until about 6 PM each day and then we’ll use motion sensor lights. We can really leverage SG&A spend that way.” When asked whether that might negatively affect comps, the big man scowled, “Same stores sales is an outdated concept, I don’t believe in it. Our CFO is the sabermetrician of retailing, we’ve moved on to more evolved yardsticks.” When this reporter asked Lampert to provide an example of such newfangled metrics, he was interrupted by a homeless man who had dropped his trousers to defecate in Aisle 6.
Resistance from Target’s board appears likely, so Bud Fox News will continue to follow this story.