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Liberty Tax to buy outlet business from Sears Hometown for $132.9M

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Liberty Tax to buy outlet business from Sears Hometown for $132.9M

Liberty Tax Inc. on Aug. 27 said it will buy the outlet business of Sears Hometown and Outlet Stores Inc., which includes Buddy's Home Furnishings stores, for approximately $132.9 million.

The tax preparation services company plans to fund the deal through a combination of new debt, balance sheet cash and/or equity contribution from a Vintage Capital Management LLC affiliate.

The move is part of the company's broader strategy to acquire franchised or franchisable businesses and will add to its complementary products and sales channels, Liberty Tax said. In July, the company bought Buddy's Home Furnishings and disclosed plans to acquire nutritional products retailer Vitamin Shoppe Inc. in August.

According to the release, the sale of the outlet business is in line with the merger agreement between Sears Hometown and Transform Holdco LLC, an affiliate of Sears and Kmart Stores parent ESL Investments Inc., which is owned by former Sears Holdings Corp. Chairman and CEO Edward Lampert. ESL Investments and its affiliates already own a 55.2% stake in Sears Hometown.

Under that deal, Transform agreed to purchase a 42% stake in Sears Hometown for $2.25 per share in cash. Sears Hometown had an option to sell its outlet businesses for no less than $97.5 million before Oct. 23, with Transform's offer subject to an upward adjustment depending on the net proceeds from the sale of outlet division.

Liberty Tax said the sale of the unit will result in net proceeds of approximately $121 million, which means Transform will now pay $3.25 per share to acquire its desired stake in Sears Hometown.

Both the Liberty Tax and Transform transactions are expected to close in October, subject to the satisfaction of specified conditions.

Shearman & Sterling LLP was the legal counsel to the special committee of Sears Hometown's board, while PJ Solomon acted as its financial adviser.