market folly

The following is a guest post from StreetCapitalist.com, a site focused on event driven value investments.

As most of you know, Eddie Lampert's investment vehicles ESL Investments and RBS Partners have substantial stakes in three businesses: Sears Holdings (SHLD), AutoZone (AZO), and AutoNation (AN).

(HT: Matt Miller) On January 11, his investment vehicles filed three SEC Form 4 filings, detailing an interesting transaction.

Sears Holdings

ESL Institutional Partners, L.P. (“Institutional”) distributed these shares of common stock, par value $0.01 per share, of Sears Holdings Corporation (“Shares”) to its general partner, RBS Investment Management, L.L.C. (“RBSIM”), in an in-kind pro rata distribution for no consideration. RBSIM then distributed these Shares to its members in an in-kind pro rata distribution for no consideration. RBS Partners, L.P. (“RBS”) distributed these Shares to its partners in an in-kind pro rata distribution for no consideration. ESL Investment Management, L.P. (“ESLIM”) distributed these Shares to its partners in an in-kind pro rata distribution for no consideration. These Shares include 3,565,316 Shares distributed by RBS in an in-kind pro rata distribution for no consideration, 244,153 Shares distributed by RBSIM in an in-kind pro rata distribution for no consideration and 15,678 Shares distributed by ESLIM in an in-kind pro rata distribution for no consideration. As a result of these distributions, Mr. Lampert directly holds Shares in which he previously had an indirect interest. The distributions did not change Mr. Lampert’s overall pecuniary interest in securities of Sears Holdings Corporation. (Sears Holdings SEC Form 4).

AutoZone

ESL Institutional Partners, L.P. (“Institutional”) distributed these shares of common stock, par value $0.01 per share, of AutoZone, Inc. (“Shares”) to its general partner, RBS Investment Management, L.L.C. (“RBSIM”), in an in-kind pro rata distribution for no consideration. RBSIM then distributed these Shares to its members in an in-kind pro rata distribution for no consideration. RBS Partners, L.P. (“RBS”) distributed these Shares to its partners in an in-kind pro rata distribution for no consideration. These Shares include 792,882 Shares distributed by RBS in an in-kind pro rata distribution for no consideration and 48,659 Shares distributed by RBSIM in an in-kind pro rata distribution for no consideration. As a result of these distributions, Mr. Lampert directly holds Shares in which he previously had an indirect interest. The distributions did not change Mr. Lampert’s overall pecuniary interest in securities of AutoZone, Inc. (AutoZone SEC Form 4).

AutoNation

ESL Institutional Partners, L.P. (“Institutional”) distributed these shares of common stock, par value $0.01 per share, of AutoNation, Inc. (“Shares”) to its general partner, RBS Investment Management, L.L.C. (“RBSIM”), in an in-kind pro rata distribution for no consideration. RBSIM then distributed these Shares to its members in an in-kind pro rata distribution for no consideration. (AutoNation SEC Form 4).


These transactions all appear to be doing the same thing, taking major holdings of ESL/RBS and giving them to investors in their funds. The reasons for doing such a transaction can vary. Think back to when Warren Buffett decided to unwind his partnership. He liquidated assets, paying a small dividend, and also distributed shares of Berkshire — which he was chairman of. For an investor in his partnership, they could either keep their faith in him and hold on to their Berkshire shares or sell. You all know how that turned out. We also note that William C. Crowley made similar filings. Crowley is Executive Vice President and Chief Administrative Officer at Sears Holding Corporation.

For Lampert, there could be other reasons too. Some funds that take controlling stakes and then decide to wind down find it more efficient to distribute out large holdings rather than sell them onto the open market. Or, it could be a way to give investors in the fund an opportunity to be extricated from having such large holdings have a dominant influence on returns. This will be a situation to watch for any Sears, AutoZone, or AutoNation holder.


The above was a guest post from StreetCapitalist.com, a site focused on event driven value investments.

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