ESL Investments, the hedge fund of Sears Holdings CEO Eddie Lampert, offered to buy the troubled retailer's remaining real estate assets, as well as the Kenmore appliance brand and Sears' Home Improvement and PartsDirect divisions.

Sears confirmed receipt of ESL's letter Monday morning and referred the proposal to an independent board of directors. Lampert and ESL President Kunal Kamlani have recused themselves from negotiations.

ESL said it believes Sears' assets have substantial value that is not being reflected in the capital markets or being maximized under Sears' existing organizational structure.

The hedge fund said it is willing to assume $1.2B in debt obligations on Sears real estate, and enter the stores into sale-leaseback deals. It values the Home Improvement and PartsDirect assets at a combined $500M and is ready to pay cash for them. ESL believes the cash from the offer could help offset Sears' operating losses, much like the $500M loan ESL gave to Sears in January 2017. That loan was backed by Sears assets.

But Lampert's moves over the past two years to reverse Sears' falling fortunes have not helped much, and USA Today reports the offer raises ethical questions about whether Lampert's financial self-interest would supersede those of shareholders. Even though he has stepped back from talks, this latest move could complicate a bankruptcy should Lampert choose that option. ESL controls 49% of Sears Holdings.

If ESL can acquire Sears' real estate assets, it would be in possession of what are now attractive redevelopment opportunities.