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Restoration Hardware in Lampert's Crosshairs

Sears Holdings Eyes Specialty Chain

Retail giant Sears Holdings has taken an interest in poised-to-go-private specialty chain Restoration Hardware (RH), to the tune of a $30.2 million purchase of RH stock, or about a 13.7% portion of the voting shares.

The move opens RH to a new potential future, an alternative to the $267 million buyout proposal by private equity firm Catterton Partners that was announced on Nov. 8.

According to the form 13-D filed by Sears with the SEC on Nov. 19, in which RH is referred to as "the Issuer" of the stock, Sears chairman Edward Lampert and other Sears management execs have discussed with RH chairman, president and ceo Gary Friedman "the potential benefits of a business or strategic combination between Sears Holdings and the Issuer."

"Sears Holdings intends to evaluate the Issuer and the desirability of proposing an acquisition of the Issuer," the document states, and among Sears Holdings' possible intentions it specifically mentions "a merger, consolidation, other business combination or reorganization involving [the] Issuer."

Ranked at No. 31 on the HTT Top 50 Retailing Giants with 2006 home textiles sales of $155 million, Restoration operates 103 stores and is an active direct-to-consumer retailer via catalogs and the internet. The company had total 2006 revenues of $712.8 million.

Sears and Kmart, the other component of Sears Holdings, together had 2006 home textiles sales of $1.43 billion.

On the day of the news, the RH share price rose more than 12% before noon, while the Sears Holdings share price fell more than 2%.

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