Sears may have an interest in putting in a competing bid for RSTO:
Restoration Hardware shares jump on Sears interest
Tue Nov 20, 2007 10:06am EST
ATLANTA (Reuters) - Shares of Restoration Hardware Inc (RSTO.O: Quote, Profile, Research) jumped as much as 15 percent on Tuesday following news that Sears Holdings Corp (SHLD.O: Quote, Profile, Research) is considering a bid for the upscale home furnishings retailer.
Sears, operator of the Kmart and Sears chains, disclosed on Monday that it owns a 13.7 percent stake in Restoration and may seek a merger or to acquire control of the company.
Earlier this month, Restoration agreed to a management-led buyout worth $267 million.
In a memo included in a Securities and Exchange Commission filing on Tuesday, Restoration told its workers there was no guarantee that a better bid would emerge. The company is open to competing bids until December 13.
Restoration shares rose 97 cents to $7.30 in early Nasdaq trading on Tuesday before retreating a bit to $7.08. Sears shares were up 7 cents to $114.27, also on Nasdaq.
In the filing, Restoration said it did not intend to comment further on the process until there was "something more definitive" to disclose.
Sears, controlled by hedge fund manager Eddie Lampert, said in a regulatory filing on Monday that it had initially proposed a $4-a-share bid for Restoration after being informed in late October that the company was weighing a management buyout.
Sears further said it could take actions including making a tender offer for some or all Restoration shares, seeking a merger, or seeking to acquire or influence control of Restoration.
"The implications of Sears Holdings' interest could be massive," Credit Suisse analyst Gary Balter, who follows Sears, said in a research note on Tuesday. "The question we expect many to raise is whether this is a signal of more deals to come in the near term."
Balter wrote that Hoffman Estates, Illinois-based Sears could be interested in Restoration for its merchandising, with the hope that it will fill a home-goods void once a Sears partnership with Martha Stewart winds down.
"As well, Sears could be looking to add a new aspirational brand store-within-a-store concept after the success with Land's End," Balter wrote.
Sears posted a 40 percent drop in quarterly profit in August and has unveiled new marketing campaigns for its Kmart and Sears chains in a bid to attract customers. Sales at stores open at least a year at both Kmart and Sears have sagged for the past six quarters.
Lampert said at Sears' annual meeting in May that the retailer was considering acquisitions and other ways to use its cash.
Last week, a regulatory filing disclosed that Lampert's ESL Investments hedge fund had acquired 16.7 million shares of Home Depot Inc (HD.N: Quote, Profile, Research), or about a 1 percent stake. Home Depot is the world's largest home improvement retailer.
(Reporting by Karen Jacobs; editing by John Wallace)
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