TORONTO - Sears Holdings Corp. (NYSE:SHLD) is selling most of its stake in its Canadian unit to raise as much as US$380 million and increase its cash holdings ahead of the crucial holiday shopping season.
The sale of about 40 million shares of Sears Canada to shareholders of Sears Holdings — including financier Edward Lampert and ESL Investments Inc., a private company that he controls — will give the publicly traded U.S. retailer some breathing room but reduce it to a minority shareholder in its Canadian counterpart.
The Chicago-area company — which owns the Sears and Kmart retail chains in the United States — expects at least US$168 million in proceeds in mid-to-late October, with the rest by early November. Lampert and ESL have told Sears they intend to exercise their option to acquire a proportional amount of the subscription rights.
Sears Holdings currently owns about 51 per cent of Sears Canada's stock. ESL is the Toronto-based company's second-largest shareholder with about 27.6 per cent of Sears Canada's stock.
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ESL, a Florida-based fund manager controlled by Lampert, is also the largest shareholder of Sears Holdings with 24.8 per cent while Lampert directly owns 23.7 per cent of Sears Holdings.
Fairholme Capital Management — which controls about 24 per cent of Sears Holdings stock — has also indicated that some its clients will also take part in the Sears Canada subscription rights offering.
The Sears Canada subscription rights are expected to be tradable and can be used to buy Sears Canada shares at C$10.60 each — a discount to the Oct. 1 closing price of C$11.12.
Sears Canada (TSX:SCC) — a Toronto-listed public company that's controlled by Lampert through Sears Holdings, ESL and his personal holdings — says it will co-operate with the plan.
It said in separate announcement that there's no assurance that it will receive a Nasdaq listing. It has yet to file a prospectus with either Canadian or U.S. securities authorities.
Sears Holdings has said previously that it was exploring options for its limping Sears Canada operations, which have been downsized in recent years amid increased competition with the arrival of other U.S. retailers.
Its current president and chief executive, Douglas Campbell, said last week that he intends to resign and return to the United States by the end of the year for personal reasons.
Sears Holdings, based in Hoffman Estates, Illinois, has faced mounting pressure from rivals in what has proved to be tough recovery from the recession.
Sears Holdings will still hold about 12 million shares of Sears Canada, valued at about US$113 million.
— With files from The Associated Press