INTRODUCTION
This Amendment No. 3 (this “Amendment No. 3”) to the Transaction Statement on Schedule
13E-3 (as amended by this Amendment No. 3, this “Transaction Statement”) is being filed by (i) Sears Hometown 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”). On September 13, 2019 the Company filed a definitive information statement on Schedule 14C (as amended, the “Information
Statement”). 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 was merged with and
into the Company (the “Merger”). Prior to completion of the Merger, the Company was 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.
This Amendment No. 3 is being filed pursuant to Rule 13(e)-3(d)(3) to report the results of the
transactions that are the subject of this Transaction Statement.
On October 23, 2019, the Company completed the Liberty Sale to the Outlet Purchaser
pursuant to the Liberty Purchase Agreement. Pursuant to the terms of the Liberty Purchase Agreement, the Outlet Purchaser paid the Company an aggregate purchase price, after giving effect to a customary working capital adjustment, of $119,960,000 in
cash (the “Sale Proceeds”), and in addition reimbursed the Company for certain costs it incurred in connection with the Liberty Sale and certain employee payments and insurance costs incurred by the Company in connection with the
Merger. Immediately following the consummation of the Liberty Sale and in accordance with the terms of the Merger Agreement, the Merger was consummated.
At the effective time of the Merger (the “Effective Time”) and in accordance with the terms of the Merger Agreement, each outstanding share
of the Company’s common stock, par value $0.01 per share (the “Company Common Stock”) (other than shares of Company Common Stock (i) owned by ESL Investments or its investment affiliates, including Edward S. Lampert
(together, “ESL”) or Transform, (ii) held in treasury by the Company or owned by any subsidiary of the Company or (iii) held by stockholders who have demanded properly in writing appraisal for such shares in accordance
with Section 262 of the Delaware General Corporation Law (the “DGCL”)) was cancelled and automatically converted into the right to receive an amount in cash equal to $3.21, without interest (the “Merger
Consideration”). The amount of the Merger Consideration was adjusted upward by $0.96 per share of Company Common Stock (the “Adjustment Amount”) from the previously announced base merger consideration of $2.25 per share of
Company Common Stock pursuant to the terms of the Merger Agreement. The Adjustment Amount is the quotient of (i) $22,460,000, the amount by which the Sale Proceeds exceeded the minimum net proceeds of $97,500,000 provided for in the Merger
Agreement, divided by (ii) 23,465,072, the aggregate number of shares of Company Common Stock and unvested Company restricted stock units issued and outstanding as of the Effective Time. Any payment of the Merger Consideration will be subject
to any required withholding taxes.
In connection with the completion of the Merger, Transform has undertaken a restructuring of certain of its
subsidiaries and affiliated entities (the “Restructuring”) and Transform’s rights and obligations under the Merger Agreement were assigned to Hometown Midco LLC, a Delaware limited liability company and an affiliate of Transform
(“Hometown Midco”). As a result of the Merger and the Restructuring, the Company became wholly owned by Hometown Midco and ESL.
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. A copy of the Written Consent is attached as Annex D to the Information Statement.