Sears explores sale of stake in Canadian arm, no quick deal seen

Wed May 14, 2014 5:31pm EDT
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By Susan Taylor and Ashutosh Pandey

TORONTO (Reuters) - Sears Holdings Corp (SHLD.O: Quote) said on Wednesday it was looking at selling its 51 percent stake in Sears Canada Inc (SCC.TO: Quote), a move that could trigger a deal for the entire Canadian operation, though a quick and easy sale was seen as unlikely.

Sears Holdings, which operates more than 2,300 stores in the United States and Canada, said it will hire an investment bank to explore options for its share of Sears Canada.

Shares of Sears Holdings, which is controlled by hedge fund billionaire Eddie Lampert, dropped nearly 6 percent on Wednesday while Sears Canada stock rose 3.4 percent.

The move comes as Sears Holdings, which operates Sears and Kmart discount stores, tries to engineer a turnaround.

Sales have declined since 2005, when Lampert merged the two U.S. chains in an $11 billion deal, and the company has closed about 300 U.S. stores since 2010, but still struggles to generate cash.

While such a large package of retail space is rarely available in Canada, industry experts said buyers may be put off by the health and composition of Sears Canada's operation, especially after the sale of leases for some of its most valuable locations.

"The pieces are likely worth more than the whole, particularly as we consider that the Sears brand has been allowed to decay," said Jim Danahy, chief executive of consultancy CustomerLAB and director of the Centre for Retail Leadership at York University's Schulich School of Business.

"This is carrion. The vultures are circling and they're not interested, no one's interested, in the whole thing."   Continued...