Restoration Hardware eyes unlikely suitor

by Linnea Kirgan, November 29th, 2007, 6:10 am

They may not immediately sound like matchmaker’s dream pair: everyman’s retailer Sears Holding Corp. (which also owns discounter Kmart) and swanky-whimsical home goods retailer Restoration Hardware. But, as sometimes happens with the most unlikely matches, these two are giving each other the once over. And, of course, as in any love story worth its salt, there’s a possible jilted suitor in the wings.

The courtship is moving at a brisk pace. Let’s review: 

• Sears starts wooing Restoration Hardware in June, with takeover talks. 
• But then strikes out with its first offer of $4 a share.
• In November, Restoration Hardware agreed to be acquired for $6.70 a share (about $267 million) by a group of investors lead by Catterton Partners and including RH’s CEO Gary Friedman. Under the agreement, Restoration Hardware can seek other bids until December 13th.
• Last week, Sears acquired a $13.7% stake in the upscale chain.
• This week, Sears announces it’s willing to pony up $6.75 a share in cash for the company, if it can have access to certain confidential company information.
• Restoration Hardware agrees on Tuesday to release the information, if Sears agrees to certain confidentiality terms and not pursue a hostile takevoer.

Restoration Hardware, which sells retro-themed home furnishings at its 100-plus stores in the US and Canada, has seen the weak housing market take a toll on its sales.

Ray Hemming, chairman of Restoration Hardware’s committee of independent directors, has been quoted saying Sears’ interest in the company is flattering. “Sears is an American icon,” he told Furniture Today, owned by Reed Business Information.

What’s in it for Sears, which has also been struggling? Some analysts say not much, but others say Sears could benefit from a high-end brand name that brings in a new level of affluent shopper looking for trendier items. Especially with its Martha Stewart Everyday license expiring in 2009.

Who will walk away with Restoration Hardware’s premium collection of hand-crafted furniture, cocktail shakers, and tournament backgammon games? With insiders bidding on the company, it can be hard to tell. Bring your sweetest offers, suitors.