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Thursday, August 17, 2006

Sears: From Our Mouth to Eddie Lampert’s Ears?

By William Trent, CFA of Stock Market Beat

We’re pretty sure we aren’t the driving force behind Eddie Lampert’s business decisions, but we thought it worth pointing out that what we suggested purely as speculation - that Sears Holdings may be inclined to pursue acquisitions including, dare we say, a wholesale club - now appear to be materializing into something still less than fact but perhaps more than mere speculation.

Sears’ earnings report included an unusually long section discussing possible uses for its cash pile, which includes $3.2 billion in domestic cash and $500 million from Sears Canada Ltd. (Toronto:SCC.TO - news). The retailer also repeated that Lampert had authority to invest excess cash.

Investors have long expected Lampert to use his hedge fund expertise — and Sears’s cash — to orchestrate big takeovers, but the only major deal so far has been a bid to buy the remaining stake in Sears Canada. That deal is tied up in a court battle with dissident shareholders.

“I think it’s a sign that there is something on the horizon,” said Kim Picciola, a retail analyst with Morningstar. “The fact that they are reiterating his authority to invest the surplus cash makes me think that there is more news to come.”

We’ll be waiting patiently for our finder’s fee.

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