INTRODUCTION
This Amendment No. 2 (this “Amendment No. 2”) to the Transaction Statement on Schedule
13E-3 (as amended by this Amendment No. 2, this “Transaction Statement”), together with the exhibits hereto, is being filed by (i) Sears Hometown and Outlet Stores, Inc., a Delaware
corporation (the “Company”), (ii) Transform Holdco LLC, a Delaware limited liability company (“Transform”), (iii) Transform Merger Corporation, a Delaware corporation (“Merger Subsidiary”),
(iv) ESL Partners, L.P., a Delaware limited partnership (“Partners”), (v) RBS Partners, L.P., a Delaware limited partnership (“RBS”), (vi) ESL Investments, Inc., a Delaware corporation (“ESL
Investments”), and (vii) Edward S. Lampert, a United States citizen (each of (i) through (vii), a “Filing Person”). The Company has filed, concurrently with the filing of this Amendment No. 2, a definitive
information statement on Schedule 14C (as amended, the “Information Statement”). A copy of the Information Statement is attached hereto as Exhibit (a)(1) and a copy of the Merger Agreement (as defined below) is attached as Annex A
to the Information Statement. All references in this Transaction Statement to Items numbered 1001 to 1016 are references to Items contained in Regulation M-A promulgated under the Securities Exchange Act of
1934, as amended (the “Exchange Act”).
This Transaction Statement relates to the Agreement and Plan of Merger, dated as of June 1,
2019 (the “Merger Agreement”), among the Company, Transform and Merger Subsidiary, pursuant to which Merger Subsidiary will merge with and into the Company (the “Merger”). Prior to completion of the Merger, the
Company has been afforded an opportunity to market and sell the Company’s Sears Outlet and Buddy’s Home Furnishing Stores businesses to a third party (an “Outlet Sale”). On August 27, 2019, the Company entered into an
Equity and Asset Purchase Agreement (the “Liberty Purchase Agreement”) with Franchise Group Newco S, LLC (the “Outlet Purchaser”) and, solely for purposes of a performance and payment guarantee on behalf of the Outlet Purchaser,
Liberty Tax, Inc., to effect an Outlet Sale to the Outlet Purchaser (the “Liberty Sale”). A copy of the Liberty Purchase Agreement is attached as Annex B to the Information Statement.
If the Merger is completed, each share of common stock, par value $0.01, of the Company (“Company Common Stock”) issued and outstanding
immediately prior to the effective time of the Merger (except for shares (i) owned by the Company as treasury stock or by any subsidiary of either the Company or Transform, (ii) owned by ESL Investments or its investment affiliates,
including Edward S. Lampert (together, “ESL”), or Transform, or (iii) held by stockholders who are entitled to demand and who properly demand appraisal under Section 262 of the General Corporation Law of the State of
Delaware (the “DGCL”) for such shares) will be cancelled and converted automatically into the right to receive $2.25 in cash, without interest, subject to an upward adjustment (as described in more detail in the Information
Statement) in the event that the Liberty Sale is completed prior to the closing of the Merger (the “Merger Consideration”). If the Liberty Sale is consummated prior to the closing of the Merger, it is currently estimated to result
in Merger Consideration of approximately $3.25 per share of Company Common Stock, although such amount could be lower under certain circumstances, as described more fully in the Information Statement. Any payment of the Merger Consideration will be
subject to any required withholding taxes.
Under Section 251 of the DGCL and the applicable provisions of the Company’s Certificate of
Incorporation (as amended) and Amended and Restated Bylaws, the adoption of the Merger Agreement by the Company’s stockholders required the affirmative vote or written consent of the holders of a majority of the outstanding shares of Company
Common Stock. On June 1, 2019, immediately following execution of the Merger Agreement, Edward S. Lampert and Partners (together, the “Principal Stockholders”) caused to be delivered to the Company an irrevocable written
consent (the “Written Consent”) adopting and approving the Merger Agreement and the transactions contemplated thereby, including the Merger, and approving any Outlet Sale to the extent such Outlet Sale would constitute a sale of
substantially all of the Company’s property and assets and be subject to the stockholder approval requirements of Section 271(a) of the DGCL (a “Section 271 Sale”), in respect of 13,226,598 shares of
Company Common Stock, representing approximately 58.3% of the outstanding shares of Company Common Stock entitled to act by written consent with respect to the adoption of the Merger Agreement and any Outlet Sale. Accordingly, the adoption and
approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, and any Outlet Sale, became effective on June 1, 2019. No further approval of the stockholders of the Company is required to adopt or approve the
Merger Agreement or the transactions contemplated thereby, including the Merger, or any Outlet Sale. A copy of the Written Consent is attached as Annex D to the Information Statement and incorporated by reference hereto as Exhibit (d)(4).