UPDATE: June 3, 2019: The holding company that owns the remaining Sears and Kmart stores has agreed to acquire Sears Hometown and Outlet Stores for $2.25 a share. Transform Holdco said in a press release that rejoining Hometown would "accelerate Transform's strategy of growing its smaller store format." With 491 Hometown stores and 126 Outlet stores, Sears Hometown would make the new Sears the third-largest U.S. appliance retailer, according to Transform, which is controlled by former Sears Holdings CEO Eddie Lampert. Under the merger agreement, Sears Hometown can try to sell itself to third parties for at least $97.5 million.

Dive Brief:

• ESL Partners, L.P., the hedge fund managed by Eddie Lampert, has replaced two directors on the board of Sears Hometown and Outlet Stores and changed its bylaws in an effort to stymie the board's plans to liquidate the retailer, according to a Monday filing with the Securities and Exchange Commission.

• ESL "acted by written consent to remove William K. Phelan and David Robbins without cause … and to appoint Alberto Franco and John Tober," according to the filing. The bylaws were altered "to ensure that the reconstituted Board has time to adequately consider the effects of such a decision and listen to stockholders' views," according to an email from ESL to Retail Dive. Phelan and Robbins had served on a special board committee tasked with negotiating with ESL, according to an April 8 press release.

• ESL and its affiliates can take action because they own about 58% of Sears Hometown and Outlet Stores. The entity that replaced Sears Holdings, Transform Holdco, also run by Lampert, aims to buy the rest, according to an email from the hedge fund to Retail Dive. Previous discussions along those lines broke down, according to the filing. "ESL was compelled to take these actions after it was unable to reach a reasonable agreement with a special committee of the company's Board to reconsider the liquidation of the Hometown business, a step we believe would diminish the company's overall value and leave the residual company at risk," according to a statement from ESL emailed to Retail Dive.

Dive Insight:

These latest machinations from Lampert, his hedge fund and the remnants of Sears are further evidence of how sprawling the Sears empire once was. The hardware and appliance retail company, whose stores are run mostly by independent dealers and franchisees, was spun off from Sears Holding Corp. in 2012.

But, as an entity licensing the Sears name, the company has suffered from Sears' decline. In its most recent quarter, Sears Hometown and Outlet Stores, Inc. narrowed its net loss by $3 million to $30.3 million, compared to $33.2 million in the year-ago quarter and improved its adjusted earnings before interest, tax, depreciation and amortization by $6.9 million to a $5.5 million loss from the previous year's $12.4 million loss. That included "$6.8 million of negative impacts directly associated with the Sears Holdings Corporation ('Sears Holdings') bankruptcy filing," the company said in a press release.

As of Feb. 2, the company or its independent dealers and independent franchisees operated 677 stores across 49 states and in Puerto Rico and Bermuda, according to its release. But in that same report, the company also said that it's accelerating its store closure plans. Shuttering 105 stores would help stem its growing losses, citing poor performance and "significant supply-chain cost increases and Craftsman and Kenmore merchandise availability issues that had a disproportionately adverse impact on the Hometown segment." The company also said it only expects its problems to grow worse.

ESL hopes to head off any further liquidations. "ESL disagrees with any decision by the Board of Directors of Sears Hometown and Outlet Stores, Inc. to liquidate the Hometown business without consultation with and support of the company's shareholders," ESL Investments, Inc. said in a statement emailed to Retail Dive. "Any decision to liquidate the Hometown business would have a negative effect on Hometown owners and their families, who have supported the company for more than 25 years, along with their employees and the communities that they serve."

Newly appointed director Tober is chairman and CEO of IT consulting firm CertaTech Solutions, ESL said in an email. He's also held leadership positions at several law firms, including as a senior corporate and litigation partner at Boies, Schiller & Flexner LLP. He was also previously president and CEO of start-up medical device company Retrax Safety Systems, Inc.

Franco is a senior advisor to Cyrus Capital Management. Before that he was president and board member of the international division of the Greater Miami Jewish Federation and, previously, a senior managing director at Bankers Trust, ESL said.