Sears Canada to close two high-profile stores, eyes third
TORONTO, June 14 (Reuters) - Hard-pressed department store chain Sears Canada Inc said on Friday it will close two high-profile Toronto area locations, selling back the leases for about C$191 million ($188 million), a move that lifted its shares as much as 14 percent, making them one of the top gainers on the Toronto Stock Exchange.
The loss-making retailer, 51 percent owned by U.S.-based Sears Holdings Corp, is considered by analysts to be vulnerable to this year's entry of U.S. discount chain Target Corp into the Canadian market.
The company is selling its leases at two suburban locations - Yorkdale Shopping Centre and the Square One mall - back to co-owners Oxford Properties Group and Alberta Investment Management Corp. The stores will close by March 2014.
Keith Howlett, an analyst at Desjardin Securities, said pretax gross proceeds from selling the two stores as well as an option on selling a third store in Toronto are C$1.88 per Sears Canada share. If the option is exercised, gross proceeds will rise by an additional 52 Canadian cents a share.
The C$1 million option is on selling the company's Scarborough Town Centre store. Oxford and AIMCo have five years to exercise the option, which would net Sears Canada another C$53 million.
Last fall, Sears Canada closed three downtown locations in Vancouver, Calgary and Ottawa in return for a hefty payout from developer Cadillac Fairview.
"Sears Canada will only monetize a very select few of its leased locations, when presented with a financial offer that is substantially higher than the future trading value," said Howlett, adding that early signs of the company's revival plan were positive. "Nonetheless, the challenge is considerable."
Shares were up 10.4 percent at C$10.43 around midday on Friday on the Toronto Stock Exchange after touching C$10.74 earlier, the stock's highest level since late December 2012.
($1=$1.017 Canadian) (Reporting by Solarina Ho; Editing by Jeffrey Hodgson; and Peter Galloway)
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