Sears Holdings Announces Recapitalization of and Investment by Ares Management Fund in Orchard Supply Hardware

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 .

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 .

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

CONTACT: Sears Holdings Corporation, +1-847-286-8371; Bob Rawitch of
Ares Management LLC, +1-818-385-1900 ext 309,

Web site:

© Transform SR Brands, LLC