Sears Holdings Jumps on Buyout Rumors

Shares of Sears Holdings (NASDAQ: SHLD ), which have tumbled over 50% over the
past 52 weeks, soared today amid rumors that billionaire Edward Lampert, the
company's chairman, along with Bruce Berkowitz of Fairholme Capital
Management, are looking to take the struggling retailer private. The rumor
which was picked up on Reuters and CNBC makes a ton of sense. Reuters reports
that there was "unusual buying in Sears call options during the first 25
minutes of trading." For years, investors have argued that Lampert might try
to unload some of the company's vast real estate holdings, which the Sears'
website brags offers a "portfolio of retail locations that is second to none.
The net book value of Sears securitized real estate assets was approximately
$800 million as of Jan. 29, 2011, according to its latest 10-K. Sears would be
seen as a distressed buyer now if it tried to sell vast amounts of real estate
given its recent announcement that it plans to shutter as many as 120
underperforming stores . Sears' failures are many, and some predate the 2005
merger of Sears and Kmart that was orchestrated by Lampert. During the 1980s and
90s, the company didn't fashion a coherent brand identity as Wal-Mart (NYSE:
WMT ) positioned itself as the low-price leader and scads of rivals, including
Target (NYSE: TGT ) and Kohls (NYSE: KSS ), plucked off Sears' middle-class
customer base. What is a Sears customer? Who knows? In 2002, Sears acquired
preppy retailer Land's End for $1.9 billion. Merging the two companies was a
bad idea from the get-go. Analysts have noted for years that the fit between the
two was "awkward" and that is still the case today. Selling Land's End
and other brands, such as Diehard, is an option that Lampert should consider to
shore up the company's finances. Investors have no faith that Lampert's
efforts to turn around Sears which began almost as soon as the ink dried on the
merger between Sears, Roebuck & Co. and Kmart will work. For one thing, he has
always talked a good game but has failed to back up his words with deeds. "We
believe that we will have significant opportunities in the years ahead to create
value through a combination of better operating performance and disciplined use
of our capital and balance sheet.," Lampert wrote in 2005 in his first letter
to shareholders. "We expect to make mistakes as a company going forward, but
we will acknowledge these mistakes, correct them and learn from them. "
Lampert's latest efforts to revive the venerable retailer involved hiring
Louis J. DAmbrosio as CEO last year despite