Tuesday, October 9, 2007

It's Lampert Rumor Season Again

It been a few months since the last round so I guess it is time for people to begin guessing what Sears Holdings (SHLD) Eddie Lampert will buy next. My guess?

One rumor says: Lampert could respond by teaming up with Steven Roth of Vornado Realty Trust to take over Macy's (M) department-store chain -- a recurring rumor that most recently pushed up Macy's share price on Sept. 14, said Davidowitz, chairman of Davidowitz & Associates, a New York-based retail consulting and investment banking firm.

Vornado has reportedly been interested in making a bid for Sears Holdings since 2005.

A Macy's takeover by Lampert and Roth would be intelligent because Vornado has unlimited capital, Roth is a successful shopping-mall developer, and Macy's would give Lampert a new opportunity to slash costs and sell off real estate, Davidowitz said.

"Lampert would save a fortune" in a Macy's takeover by combining Sears, Kmart and Macy's functions and saving costs on items such as accounting, distribution, administration and merchandising.

Lampert also would gain tremendous power because he would own two department-store anchors at shopping malls nationwide, Davidowitz said."

All of the above is true, but one thing gets me. Lampert has never had a partner, why would he want one now? The reason Lampert owns over 50% of Sears shares (after the current buyback is finished) is that he wants autonomy. If it is true Vornado has been after Sears since 2005 and Lampert has not budged, why would he now? When you consider he could pull off the deal by himself (Macy's has a market cap 1/2 that of Sears and Sears is virtually debt free at the moment)the chances of a Vornado partner ship seems even less remote.

The next prognostication has new shareholder Bill Ackman pressuring Lampert into dumping Sears valuable real estate holding. Does anyone really think Lampert would let a 3.5% holder pressure him into selling real estate during a real estate slump?

Personally I presume he would rather remove his eye with a dinner fork than have Ackman tell him what to do with his company. A more reasoned guess would be Ackman sees the value in Sears and is hopping on for the ride. Ackman is no dummy and I am giving him some credit here for not being such an egomaniac that he would expect to be able to pressure Lampert into doing anything he does not want to.

What people who believe in this scenario do not understand is the patience of Lampert. If this summer has proven anything, a dramatic drop in the price of the stock will not push him into making a move he does not want to make. What was his reaction this summer? Gobble up shares as fast as he could.

Alas rumor mongers, there most likely is nothing there. But I will admit that the exercise is a ton of fun... keep the rumors coming...


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