Sears Holdings Corp. shares reached a record high Tuesday, fueled by the latest buzz over possible acquisition targets on Chairman Edward Lampert’s shopping list.
The billionaire investor is reported to be interested in buying Anheuser-Busch Cos., the St. Louis-based King of Beers that has been struggling to revive sales as more Americans drink wine and spirits instead of Budweiser.
Last month shares of Home Depot Inc., the Atlanta-based home improvement retailer, spiked on speculation that Lampert was buying a stake in that company.
Anticipation over Lampert’s next move has reached a fever pitch since August, when the hedge fund investor signaled in Sears’ second-quarter earnings report that he is looking for acquisitions and could invest outside the retail industry.
Just what Lampert’s intentions are is anyone’s guess, but the hope that something big is in the works sent Sears up 2.5 percent, to a record $169.29, on Tuesday, after rising as high as $171.40 earlier in the day.
The London Times reported Tuesday in its “Rumour of the Day” column that the latest “whisper on Wall Street” is that Lampert’s ESL Investments Inc. is poised to make a $56-a-share bid for Anheuser-Busch, a price that would value the world’s largest brewer at $44 billion, a 19 percent premium over Monday’s closing stock price. The report sent shares of Anheuser-Busch up 2.1 percent, to $47.98.
Home Depot shares increased more than 8 percent in a week’s time last month on similar speculation and have since leveled off, closing Tuesday at $37.76.
Officials at Sears and Anheuser-Busch declined to comment. Home Depot officials couldn’t be reached for comment. Investors are hoping that Lampert will follow through with his plan to turn Sears into a holding company along the lines of Warren Buffett’s (the last name as published has been corrected in this text) Berkshire Hathaway Inc., said Ivan Feinseth, Matrix USA research director, who rates Sears a “buy.”
“It’s no longer a traditional retailer,” said Feinseth.
That said, the holding company Lampert formed by combining Sears and Kmart is only 18 months old. Berkshire Hathaway has been around since 1956.
Analysts point out that buying Home Depot or Anheuser-Busch is a risky proposition given their market capitalization–$78 billion and $37 billion, respectively. Sears is worth $26 billion.
The Hoffman Estates-based retailer had $3.7 billion in cash as of July 29. It has the capacity to borrow more, but issuing debt would be expensive given the company’s junk rating. And Lampert has an aversion to overpaying.
To be sure, each day Sears’ stock climbs higher, Lampert has more equity with which to put together a deal. He used Kmart Holding Corp.’s soaring stock price to engineer the acquisition of Sears, Roebuck and Co. last year. And he could do it again.
“Of course, anything could happen, but just from a fundamental perspective, it seems like the deal is far-fetched,” said Arun Daniel, consumer analyst with ING Investment Management in New York.
———-
smjones@tribune.com
