In a regulatory filing Monday, Sears Holdings disclosed that it is prepared to offer $6.75 a share for Restoration Hardware. That bid is higher than Restoration's current $6.70-a-share buyout agreement with a group led by private-equity firm Catterton Partners.
In a letter to Restoration Hardware's board last week, Sears said it would contemplate a merger agreement "substantially similar" to the Catterton deal, modified for a tender offer structure and a lower break-up fee. Sears is seeking to enter a confidentiality agreement with the company to do due diligence, but said in its letter that Restoration hasn't agreed to such a plan.
On Sunday, Restoration Hardware's special board committee informed Sears that it was unwilling to enter into a confidentiality agreement providing for a tender offer exception, Sears Holding's filing said.
Sears Holdings, owner of the Kmart and Sears chains, disclosed last week that it bought a 13.7% stake in Restoration Hardware and was mulling an offer for the company.
According to a Securities and Exchange Commission filing, Sears Holding Chairman Ed Lampert met with Restoration Hardware executives over the summer and in late October offered $4 a share for the company. But Catterton, along with Restoration Hardware CEO Gary Friedman, came along in early November with the $6.70 a share bid -- a 150% premium over the stock's price when the deal was announced.
Sears said in its letter to Restoration's board that it is "concerned" by certain aspects of the management and director-led buyout, saying that the company entered into a confidentiality agreement with Catterton in July and has since been focused on that deal rather than exploring other offers.
"Notwithstanding our known interest, you did not provide us with either guidance or information which could potentially have enabled us to submit a superior proposal to the insider deal in advance of its execution," Sears said in the letter.
Shares of Sears Holdings recently were down 49 cents to $112.09. Restoration Hardware shares were trading down 8 cents to $6.98. The stock price above the proposed buyout agreement suggests that investors are predicting a bidding war.