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HOFFMAN ESTATES, IL-Sears Holdings Corp. has put all the pieces in place to acquire Sears Canada Inc. for $719 million. The company is offering C$35.50 for all of the outstanding shares of the Toronto-based retailer, an 8.7% premium over Friday's closing price and a 22.2% premium over the average closing price since Aug. 31.
Sears Holdings already owns more than 57 million common shares, representing roughly 53.8% of the outstanding common shares of Sears Canada. The buyout involves 46.2% of Sears Canada shares that are not held by Sears Holdings. Sears Canada's next largest shareholder, Natcan Investment Management Inc. had agreed to sell off its 9.7 million shares (or 9.06% of the outstanding shares).
Sears Holdings' vice chairman Alan Lacy says in a statement that Sears Canada's best opportunity for success is total ownership by Sears Holdings. "On a stand-alone basis, Sears Canada's retail business faces an increasingly competitive retail environment in Canada, and the principal factor that will determine the value of this business is the prospects for its retail operations," he states.
The move was a surprise, according to most analysts who had expected that Sears Holdings would sell off its stake in Sears Canada rather than go all in. The deal is expected to close during the first quarter of 2006 if all goes as planned. However, there are rumblings in the market from other Sears Canada shareholders that Sears Holdings' offer, although a premium to the recent trading, is not high enough. Some have indicated that Sears Canada shares are worth as much as $40 per share.
Sears Canada operates 188 corporate stores, 180 deal-run units and 67 home-improvement showrooms.
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