CONTACT:
Sears Public Relations And Communications
(847) 286-8371
Sears Holdings Announces Recapitalization of and Investment by Ares Management Fund in Orchard Supply Hardware
HOFFMAN ESTATES, Ill., Oct. 7 /PRNewswire-FirstCall/ -- Sears Holdings
Corporation (Nasdaq: SHLD) announced today that the Private Equity Fund of
Ares Management LLC has agreed to invest $58.7 million in cash for 19.9
percent of the stock in Orchard Supply Hardware Stores Corporation and a
three-year option to purchase, for $126.8 million, an additional 30.2 percent
of that company. In connection with the initial investment, Orchard Supply
Hardware is also expected to issue approximately $405 million in debt.
William C. Crowley, executive vice president and chief financial and
administrative officer of Sears Holdings Corporation, said, "We are pleased
that the agreement with Ares will not only provide Orchard Supply with the
capital to pursue its growth strategy, but also will allow Sears Holdings to
focus more of its management attention and capital on the opportunities in our
core business. We believe this transaction provides us with an excellent
opportunity to create shareholder value while allowing us to participate in
the improving business performance at Orchard Supply -- performance which we
believe will be further enhanced by the involvement of the Ares team."
David B. Kaplan, Senior Partner of Ares Management, said, "We are
delighted to partner with Sears and the management team of Orchard Supply in
this transaction which provides the business with both capital and
sponsorship. We all share the collective vision that Orchard Supply is an
exciting retail concept with strong growth prospects and we look forward to
applying our experience in retail and consumer products to assist the company
in its expansion plans."
Sears Holdings also announced that it expects its wholly-owned subsidiary
Sears, Roebuck and Co. to receive a dividend from Orchard of approximately
$450 million.
Assuming consummation of the initial $58.7 million investment, Sears
Holdings will retain an 80.1% equity interest in Orchard Supply Hardware which
would be reduced to approximately 49.9% should the option be exercised in the
next 3 years. The transaction is expected to close in the fourth quarter of
2005, subject to regulatory approval, completion of Orchard Supply Hardware's
debt arrangements and customary closing conditions.
Citigroup Global Markets Inc. and Lehman Brothers Inc. acted as financial
advisors to Sears with respect to the transaction. Simpson Thacher & Bartlett
LLP provided legal counsel to Sears and Proskauer Rose LLP provided legal
counsel to Ares.
About Orchard Supply Hardware
Orchard Supply Hardware, which is headquartered in San Jose, California,
is a leading chain of 84 hardware and garden retail stores located throughout
California. Orchard Supply has a rich heritage, having started in 1931 as a
farmers' cooperative in Santa Clara Valley offering supplies to local growers.
For more information about Orchard Supply Hardware, visit the company's Web
site at http://www.osh.com .
About Sears Holdings
Sears Holdings Corporation is the nation's third largest broadline
retailer, with approximately $55 billion in annual revenues, and with
approximately 3,900 full-line and specialty retail stores in the United States
and Canada. Sears Holdings is the leading home appliance retailer as well as
a leader in tools, lawn and garden, home electronics and automotive repair and
maintenance. Key proprietary brands include Kenmore, Craftsman and DieHard,
and a broad apparel offering, including such well-known labels as Lands' End,
Jaclyn Smith and Joe Boxer, as well as the Apostrophe and Covington brands. It
also has Martha Stewart Everyday products, which are offered exclusively in
the U.S. by Kmart and in Canada by Sears Canada. For more information, visit
Sears Holdings' website at http://www.searshc.com .
About Ares Management
Ares Management LLC ("Ares") is an independent Los Angeles based
investment firm with over 90 employees and approximately $7.5 billion of
committed capital under management. Founded in 1997, Ares specializes in
originating and managing assets in both the private equity and leveraged
finance markets. Ares' conducts its private equity activities through the
Ares Corporate Opportunities Fund, L.P. ("ACOF") ACOF focuses on injecting
flexible, long-term equity capital into middle market companies to position
them for growth. Ares' leveraged finance activities include the acquisition
and management of bank loans, high yield bonds, mezzanine and special
situation investments, which are held in a variety of investment vehicles.
Forward-Looking Statements
This press release contains forward-looking statements about Sears'
expectations regarding the investment by Ares in its Orchard Supply Hardware
business, including statements concerning expected benefits to Sears and the
timing of closing the transaction. These forward-looking statements are based
on assumptions about the future that are subject to risks and uncertainties,
and actual results may differ materially from the results projected in the
forward-looking statements. Risks and uncertainties include the possibility
that the transaction does not close, that the companies may be required to
modify aspects of the transaction in order to achieve regulatory approval,
that Orchard Supply Hardware will not have sufficient cash to pay the dividend
to Sears or other factors outside the control of Sears and Ares. The company
intends these forward-looking statements to speak only as of the time of this
release and does not undertake to update or revise them, as more information
becomes available.
SOURCE Sears Holdings Corporation
Web site: http://www.sears.com http://www.osh.com
http://www.searshc.com
CONTACT: Sears Holdings Corporation, +1-847-286-8371; Bob Rawitch
of Ares Management LLC, +1-818-385-1900 ext 309,
brawitch@winnr.com
