Sears to sell Craftsman for $900 million, shutter 150 stores
Hoffman Estates-based Sears Holdings Corp. has agreed to sell its Craftsman tool brand to Stanley Black & Decker Inc. for about $900 million, marking CEO Edward Lampert's third move in the last two weeks to prop up the beleaguered retailer with fresh sources of funding.
Under terms of the deal, Stanley will pay $525 million at closing and $250 million after three years, the companies said in a statement Thursday. The buyer also will make annual payments on new Craftsman sales for 15 years.
Separately, Sears said it will shutter 150 unprofitable stores to help streamline the chain. This includes 108 Kmart stores and 42 Sears stores that will close by late March. None are in the Chicago suburban area, said Sears spokesman Howard Riefs. The only retailers scheduled to close in Illinois are Kmart stores in Alton and Granite City.
With Sears's department-store business continuing to bleed cash, Lampert has turned to selling and spinning off assets to keep the company operating. The hedge fund manager, who's also the retailer's chairman and largest investor, agreed earlier this week to lend the company $500 million and said last month that affiliates of his firm would offer it a $200 million line of credit. Sears also has been reviewing its DieHard batteries and Kenmore appliance brand for potential sales.
"Looking ahead, we will continue to take actions to adjust our capital structure, meet our financial obligations and manage our business to better position Sears Holdings to create long-term value," Lampert said in Thursday's statement.
Lampert also said the Sears and Kmart stores and websites will continue to sell the Craftsman brand.
Craftsman has been part of Sears since 1927, when the retailer acquired the brand for $500. The tools debuted in the iconic Sears catalog two years later. By the 1940s, the brand benefited from a surge in power-tool sales. In 1981, President Jimmy Carter was given a Craftsmen woodworking set as his farewell gift when he left the White House.
Craftsman was eventually offered through other retailers, including Costco Wholesale Corp. and Ace Hardware, but Sears's decline has taken a toll on the brand. Only about 10 percent of Craftsman-branded products are currently sold outside of Sears, and the agreement allows Stanley to increase Craftsman sales in these untapped channels. The license will be royalty-free for 15 years, and then generate 3 percent afterward.
"To accommodate the future growth of Craftsman, we intend to expand our manufacturing footprint in the U.S.," Stanley CEO James M. Loree said in the statement. "This will add jobs in the U.S., where we have increased our manufacturing head count by 40 percent in the past three years."
The Craftsman deal comes about three months after Stanley agreed to buy Newell Brands Inc.'s tools business for $1.95 billion.
For Sears, the sale is the latest in a long string of moves designed to generate cash for the ailing retail business. The company raised $2.5 billion in 2015 by forming a real estate investment trust that bought more than 250 of its properties.
And more property sales may be coming. This week's $500 million loan was secured by the company's real estate in anticipation that a future sale of some properties could help pay back the debt.
It's also been closing poor-performing locations, an effort it continued with Thursday's announcement. Lampert also previously spun off the Sears Hometown & Outlet business and Lands' End clothing line.
Still, challenges remain. The company needs to raise a total of roughly $1.5 billion to make it through 2017 comfortably, Christina Boni, an analyst at Moody's Investors Service, has estimated.
• Daily Herald Business Writer Anna Marie Kukec contributed to this report.