Sears Holdings Closes Sale of Craftsman

This past week beleaguered retailer Sears announced today that it has closed the previously announced sale of their iconic private brand Craftsman to Stanley Black& Decker for a net present value of over $900 million.

Edward S. Lampert, Chairman and Chief Executive Officer of Sears Holdings, said: “The successful closing of the Craftsman transaction provides immediate liquidity to Sears Holdings, while enabling us to participate in the future growth of the Craftsman brand. In addition, the related agreement with the Pension Benefit Guaranty Corporation will continue to secure our pension obligations, while helping us maintain financial flexibility.”

The transaction provides Stanley Black& Decker with the right to develop, manufacture and sell Craftsman-branded products outside the Sears Holdings and Sears Hometown & Outlet Stores distribution channels. As part of the agreement, Holdings will continue to offer Craftsman-branded products, sourced from existing suppliers, through its current retail channels via a perpetual license from Stanley Black& Decker, which will be royalty-free for the first 15 years after closing and royalty-bearing thereafter.

As part of the closing, the Company received an initial upfront cash payment of $525 million subject to closing costs and an adjustment for working capital changes. In addition, Stanley Black& Decker will pay a further $250 million in cash in three years and Sears Holdings will receive payments of between 2.5% and 3.5% on new Stanley Black& Decker sales of Craftsman products for the next 15 years.

In connection with the closing of the Craftsman transaction, the Company reached an agreement with the PBGC pursuant to which the PBGC has consented to the sale of the Craftsman-related assets that had been “ring-fenced” under the March 2016 pension plan protection and forbearance agreement between the PBGC and the Company and certain related transactions. As a condition to obtaining this consent, the Company agreed to grant to the PBGC a lien on, and subsequently contribute to the Company’s pension plans, the value of the $250 million cash payment payable to the Company on the third anniversary of the Craftsman closing, with the value of such payment being fully credited against certain of the Company’s minimum pension funding obligations in 2017, 2018 and 2019.

The Company also granted a lien to the PBGC on the 15-year income stream relating to new Stanley Black& Decker sales of Craftsman products, and agreed to contribute the payments from Stanley Black& Decker under such income stream to the Company’s pension plans, with such payments to be credited against the Company’s minimum pension funding obligations starting no later than five years from the closing date. The Company also agreed to grant the PBGC a lien on $100 million of real estate assets to secure the Company’s minimum pension funding obligations through the end of 2019, and agreed to certain other amendments to the PPPFA.



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