Sears' Lampert Finds a New Foe

Sears Holdings, through a spokesman, declined to comment, as did Catterton and Restoration Hardware.

In addition to topping Catterton's offer, Sears said in its letter it would offer "a lower, more reasonable break-up fee" in its buyout offer, suggesting that Restoration's board could be shortchanging shareholders by charging them too steep a fee for backing out of the director-led buyout deal.

"Gary Friedman wants to take this baby private on his own terms so he can build it and have a nice chunk of equity," says Howard Davidowitz, chairman of retail research and investment banking firm Davidowitz & Associates. "He knows that Lampert probably sees value in the brand and wants to combine it with Sears. As a high-end merchandiser, he doesn't want any part of that."

For their part, Sears shareholders were none too pleased to learn that Lampert is making a play for a home-furnishings retail chain with just $713 million in annual revenue. Such a transaction hardly qualifies for the kind of master stroke that speculators are expecting from Lampert in order to get Sears shares moving again.

Its stock is down 39% since its highs in early May, and on Monday it lost $4.81, or 4.3%, to $107.77.

Lampert's other investments, like Citigroup (C Quote) and Home Depot(HD Quote), also have come unraveled over the summer amid the credit crisis and a consumer-spending slowdown, but he seems unfazed by Wall Street's worries.