Sears documents outline moves to thwart bidders


CHICAGO -- Sears, Roebuck & Co. released a trove of documents yesterday, part of a shareholder lawsuit against Sears that had been sealed.

While incomplete, the documents support the shareholders' view that one reason for Sears' large-scale restructuring announced in October 1988 was to thwart hostile bidders.

Directors of a public company can legitimately defend it against a hostile bidder, but the defense becomes illegal if the company cannot offer shareholders a better alternative than the bidder and if the directors' primary purpose is to entrench themselves.

The shareholders' suit contends that Sears' management acted to entrench itself, rather than to benefit shareholders.

Sears disputes that contention.

The documents released are mostly shareholder accusations and Sears' responses.

Sears released only snippets of the depositions that its executives have given and of the internal Sears memorandums that have been offered into evidence.

In one memorandum, James M. Denny, Sears' chief financial officer, wrote to other Sears executives in advance of a secret meeting they held at the Ritz-Carlton Hotel in Chicago on Aug. 30, 1988, to discuss the planned restructuring.

"The purpose of the analysis is to assist in the formulation of a strategy to deal with a hostile approach to the company," Mr. Denny wrote.

In another memo released yesterday, Mr. Denny discussed the plan for a huge repurchase of Sears stock as part of the restructuring, saying, "It is important to act before too large a percentage of stock falls into the hands of arbitrageurs."

The documents also referred to a memo written in March 1988 by John Sayre, a Sears financial analyst, to Stanley Wright, head of Sears' corporate financial analytical group.

Mr. Sayre wrote that the restructuring would be an "essential weapon against unfriendly investors."

In another memo, an unidentified Sears executive encouraged Sears to play down the anti-takeover effects of an employee stock ownership plan, which Sears formed in 1989, and to develop instead a "legitimate" public reason for establishing an employee stock plan.

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