Wednesday, June 6, 2007

Analyst: Ackman vs. Lampert Showdown Looming?

Carol Levenson, an analyst with independent research firm Gimme Credit, wrote in a note to investors Tuesday that Sears Holdings (SHLD) could be a "dark horse" target, possibly so Ackman could lobby for a Sears Canada spinoff to boost shareholder value. This is foolish

Last week, analyst Sean Egan, managing director at Egan-Jones Ratings Co., raised the speculation that Lampert might buy the 58 percent of Sears Holdings Corp. he doesn't already own and take it private, given its poor performance. Not foolish but unlikely. Let's address these one at a time.

In the past Ackman has made a name for himself with high profile shareholder initiatives at McDonalds (MCD) and Wendy's (WEN). An attempt to do battle with Lampert at Sears will be a disaster for him. Unlike McDonalds and Wendy's, Lampert controls 65 million shares of Sears or over 40% of all shares and based on the recent 10Q filed June 1st, the number of outstanding shares is decreasing, increasing his ownership percentage. Nothing, I repeat nothing will be done at Sears that Lampert does not want done. You also have to consider the stocks rise from $23 to $180 in four years. Ackman will have a tough time convincing anyone he could do better and that getting rid of Sears Canada will benefit anyone but him (he owns I believe 12% of it). If anything, shareholders will tell him to take a hike, sell Lampert (who owns 70% of it) his stake and let Eddie do his thing with it. His battle with Lampert over Sears Canada (SCC.TO) was well documented and he has profited with it's stock price rising 50% the past year as he refused to sell his stake. Now, refusing to sell your shares and convincing Lampert to spin off his are two entirely different things.

Ackman is no dummy and he surely realizes this.

Now, for the "taking private" argument. Possible but unlikely. If Lampert has any desires to become the "next Warren Buffett", he cannot do that with a private company. What has made Buffett iconic is that mom, pop and the next door neighbor got rich with him, a private Sears Holdings eliminates that possibility. Will he purchase more shares for himself and have Sears purchase more to decrease to count and increase EPS? Yes and he is. Good

Alas this seem to be not much more than rampant Lampert speculation....

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