Sears ready to buy out the rest of Restoration Hardware

CHICAGO — Sears said Monday it was prepared to buy out the rest of retro-themed retailer Restoration Hardware for a nickel-per-share premium over a competing offer, a move that could help the iconic chain spruce up its merchandise lines.

Sears Holdings, which already owns 13.7 percent of the home-goods company, said it has repeatedly asked for access to Restoration Hardware's confidential financial information and would make a binding offer if those details are provided. But so far the Northern California-based company has rebuffed those requests.

Sears' tentative offer of $6.75 per share, made public Monday in a regulatory filing, is less than 1 percent above a dueling bid from private equity firm Catterton Partners.

It's also less than the current trading price of Restoration Hardware's stock, which has more than doubled in value since the beginning of the month.

Earlier this month, Catterton offered Restoration Hardware $6.70 per share, a deal the two companies said had a total equity value of $267 million.

But based on the 38.8 million Restoration Hardware shares outstanding at the end of the quarter, that offer is worth about $260 million, and Sears' bid is worth about $262 million.

"We believe that this proposal ... would provide a compelling opportunity for your stockholders to realize significant value for their shares in an all-cash transaction," Sears Chief Executive Officers William Crowley wrote in a note to Restoration Hardware board members on Friday.

The letter was released Monday morning.

Restoration Hardware has until Dec. 13 to solicit competing proposals to Catterton's buyout offer.

A Sears spokesman declined to comment Monday as did spokeswomen for Catterton and Restoration Hardware.

Restoration Hardware, which operates about 100 stores, racked up $713 million in revenue last year through sales of its home decor, furniture and gifts to a mostly affluent customer base.

Comparatively, Sears Holdings, which includes the Sears stores and discount chain Kmart, had net revenue of $53 billion.

A buyout offer was widely expected after Sears announced its stake in Restoration Hardware last week. However, the deal has already been criticized by many investors who say adding the upscale company would provide little benefit to the ailing Sears empire.

Others have said an acquisition would give Sears an important high-end brand name after the company's licensing agreement with Martha Stewart expires in 2009, enlivening Sears' merchandise and bringing in shoppers who've shunned the company's products for trendier options.

Sears shares fell $4.81, or 4.3 percent, to close at $107.77 on Monday, while Restoration Hardware shares rose by a penny to $7.07.