Liberty Tax has agreed to acquire Sears Hometown‘s outlet business and its Buddy’s Home Furnishings Stores (collectively, the “Sears Outlet business”) in an all cash transaction valued at up to approximately $132.9 million.
Liberty Tax intends to finance the transaction through a combination of new debt, Liberty Tax’s balance sheet cash and/or an equity contribution from an affiliate of Vintage Capital Management. In connection with purchase, Liberty Tax entered into a debt commitment letter with Guggenheim Credit Services, as administrative agent and lead arranger, and clients managed by Guggenheim Investments, the global asset management and investment advisory business of Guggenheim Partners, and an equity commitment letter with an affiliate of Vintage, each of which is subject to customary conditions.
The sale of the Sears Outlet business is in accordance with the terms of the agreement and plan of merger between Sears Hometown and Transform Holdco, which was announced by Sears Hometown and Transform on in June. As a result of the sale, which is estimated to result in net proceeds (as defined in the merger agreement) of approximately $121 million, the merger consideration payable by Transform in the merger transaction for the outstanding shares of Sears Hometown not owned by ESL Investments and its affiliates is estimated to be approximately $3.25 per share in cash.
Concurrently with its entry into the Purchase Agreement, Sears Hometown entered into a letter agreement with Transform and a wholly owned subsidiary of Transform which, among other things, provides that, subject to the satisfaction of certain conditions, the merger will close substantially concurrently with the closing of the sale.
Both the sale and the terms of the purchase agreement have been unanimously approved by the boards of directors of both Liberty Tax and Sears Hometown, and have also been approved by the special committee of the Sears Hometown board of directors. The sale and the merger between Sears Hometown and Transform are each expected to close in October 2019, subject to the satisfaction of specified conditions.
In addition, Buddy’s Newco, a subsidiary of Liberty Tax, has acquired 41 Buddy’s Home Furnishings stores from A-Team Leasing, an existing Buddy’s Home Furnishings franchisee. In connection with its sale of these Buddy’s Home Furnishings stores to Liberty Tax, A-Team Leasing intends to become a franchisee of five Sears Outlet locations, with this franchising transaction expected to become effective concurrently with the sale. Liberty Tax’s acquisition of the 41 Buddy’s Home Furnishings stores from A-Team Leasing was financed, in part, through approximately $23 million of additional borrowings under the existing secured credit facility of Buddy’s.
Andrew Laurence, chairman of Liberty Tax’s Board of Directors, said, “We are excited about the acquisition of Sears Outlet and its unique model that offers its customers in-store and online access to outlet-value products across a broad assortment of merchandise categories, while serving as a valuable supply chain partner for its vendors. This is a continuation of Liberty Tax’s strategy of identifying and acquiring franchised or franchisable businesses while also building scale at attractive acquisition valuations. It’s an exciting time for Liberty Tax and its shareholders as we begin to recognize the strength in our future-facing franchise business model.”
Liberty Tax is the indirect parent company of Liberty Tax Service and Buddy’s Home Furnishings and expects to acquire Vitamin Shoppe in the third or fourth quarter of 2019.
