August 15,
2019
Benet J. O'Reilly, Esq.
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, NY 10006
Re: Sears Hometown and Outlet Stores, Inc.
Schedule 13E-3 filed by Sears Hometown and Outlet Stores, Inc.,
Transform
Holdco LLC, Transform Merger Corporation, ESL Partners, L.P., ESL
Investments, Inc., Edward S. Lampert, and RBS Partners, L.P.
Filed July 26, 2019
File No. 005-86980
Preliminary Information Statement on Schedule 14C
Filed July 26, 2019
File No. 001-35641
Dear Mr. O'Reilly:
We have reviewed the filings referenced above and have the following
comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand the disclosure.
Please respond to this letter by amending the filings, by providing the
requested
information, or by advising us when you will provide the requested response. If
you do not
believe our comments apply to the facts and circumstances or do not believe an
amendment is
appropriate, please tell us why in your response.
After reviewing any amendment to the filings and the information you
provide in
response to these comments, we may have additional comments. Please note that
capitalized
terms used but not defined herein have the meanings ascribed to them in the
filings.
Preliminary Information Statement on Schedule 14C
Record Dates, page 5
1. Notwithstanding that such language is essentially lifted from the
Delaware statute, please
clarify the meaning of the phrase "the day next preceding the date" so
that it is
understandable to shareholders. Please do the same on page 65.
Benet J. O'Reilly, Esq.
August 15, 2019
Page 2
Sale of the Outlet Segment, page 7
2. Please describe, in reasonable detail, here and elsewhere as
appropriate, the efforts that
have been made to negotiate an Outlet Sale. We note that August 24 marks
the Outlet
Sale End Date, unless extended.
Background of the Transaction, page 17
3. We note the disclosure on pages 28, 29, and 31 regarding the Special
Committee's
consideration of pursuing a legal challenge to the ESL Action and the
enforceability of
the ESL Bylaw Amendment. In light of the materially detrimental impact
that the ESL
Bylaw Amendment had on the Special Committee's ability to negotiate a
favorable
outcome for unaffiliated stockholders, please provide more detail on the
discussions and
analysis that went into not pursuing legal action.
4. We note the disclosure at the bottom of page 31 that refers to Mr.
Lampert's "expressed
interest in Transform pursuing a potential Outlet Go Shop Transaction."
Please advise
whether the interest involved Transform pursuing such a transaction or
whether it
involved the Company pursuing such a transaction.
5. The Transform Matching Ceiling is defined on page 33 and negotiations
with respect to it
are discussed on pages 33-35. The descriptions of the negotiations that
took place over
the final days leading up to execution of the Merger Agreement do not,
however, mention
the Transform Matching Ceiling, yet it appears that the Merger Agreement
includes the
concept. Please revise the disclosure in this section to explain the
final negotiation of the
Transform Matching Ceiling, noting any evolution in its terms from its
last mention on
page 35 to the form it took in the signed Merger Agreement. Please do
the same for the
Outlet Sale Minimum Proceeds Amount, the Outlet Marketing Period, and
the Outlet
Closing Period.
6. On page 37, please elaborate on PJ Solomon's financial analysis and/or
provide a cross-
reference to the "Opinion of PJ Solomon" section that appears later.
7. Given the fact that the Special Committee consisted of only one
individual, please
remove the word "unanimously" when referring to its decision-making
(notwithstanding
the fact that the Merger Agreement uses such term). Please do the same
on pages 58 and
60.
Recommendation of the Special Committee and Reasons for Recommendation, page 37
8. We note the disclosure on pages 38-41 that briefly mentions the Special
Committee's
analysis of a potential Outlet Sale as being a positive factor, and the
risk of an Outlet Sale
not occurring as being a negative factor. Please expand this disclosure
to describe what
consideration the Special Committee gave to the possibility that certain
terms of the
Merger Agreement including, for example, the matching rights given to
Transform and
Benet J. O'Reilly, Esq.
August 15, 2019
Page 3
the various timing and other requirements imposed by the Merger
Agreement on the
Outlet Sale Process would significantly deter any potential third
party buyer from
negotiating a purchase of the Outlet Segment.
Opinion of PJ Solomon, page 43
9. Please revise to disclose the data underlying the results described in
each of the three
principal analyses to show how that information resulted in the values
disclosed. In
particular, please revise the summaries to include more data from pages
12 and 15 of the
presentation filed as Exhibit (c)(14) so that the calculations are
apparent.
Please contact me at (202) 551-8094 if you have any questions regarding our
comments.
Sincerely,
/s/ David M.
Plattner
David M. Plattner
Special Counsel
Office of Mergers
and Acquisitions