Sears Looks to Buy Rest of Canadian Business

Discussion
Dec 05, 2005
George Anderson

By George Anderson

Sears Holdings announced it has offered to buy all outstanding shares of Sears Canada that it does not already own.

In a released statement, Alan Lacy, vice chairman of Sears Holdings, said its offer “represents an excellent opportunity for Sears Canada shareholders to realize a premium and liquidity for their shares. 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. We intend to maintain a controlling ownership interest in Sears Canada, but believe Sears Canada will have a much greater opportunity to succeed with the benefits that will come with 100 percent ownership.”

Mr. Lacy said that Sears Holdings intends to continue operating in Canada as a retail business.

Moderator’s Comment: What do you make of Sears Holdings’ bid for full ownership of Sears Canada?
George Anderson – Moderator

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9 Comments on "Sears Looks to Buy Rest of Canadian Business"


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Mark Lilien
Guest
15 years 3 months ago

Sears Canada shareholders are getting a good deal for themselves. The special dividend plus the buyout price is C$35.50, compared to the usual price of less than C$25 for most of the year. Sears Canada is positioned differently than Sears USA. The Canada stores have good fashion acceptance in addition to the hard goods acceptance. Will the deal be good for the future of Sears Canada? That depends 100% on the Alan Lacy Canadian management team. Since the turnaround in the USA isn’t yet established, it’s hard to say what will happen. Canadian retailing is not the same as the USA. The country is MUCH younger, 90% of the population is within 100 miles of the US border, and there are only 3 major markets. It’s best to allow Sears Canada to continue its own identity.

Tom Bales
Guest
Tom Bales
15 years 3 months ago
I don’t think this has anything to do with enhancing SHC’s retail operations. This is purely about the dividend that Sears CA’s major investors will realize. When you consider who Sears CA’s majority shareholder is and who the majority shareholder in that majority shareholder is, it becomes at least possible to surmise that the dividend, along with the dividend already derived from the Orchard Supply manipulation, will quiet some of the SHC shareholder grumbling that has arisen recently. At least Sears CA isn’t going into debt to provide the dividend as OSH is doing. Not incidentally, these dividends should also put a substantial heft into Mr. Lampert’s management fees for the next year. At this point, Sears has shown itself unwilling or unable to do anything to stem the decline in market share or same store sales. In fact, those declines have actually increased since the merger took place. Same Store Sales are down 8.4% as of a couple of days ago, more than twice the rate of decline in 2004. Sears CA, which was… Read more »
David Livingston
Guest
15 years 3 months ago

I’m not sure what to make of this. So far, we have seen mostly empty promises from Kmart for the past two years. The majority of the stores are still run down old clunkers with amazingly low sales per square foot performances. So far only a token amount of stores have been improved for window dressing purposes. My guess is this Canadian deal has nothing to do with retailing.

Craig Sundstrom
Guest
15 years 3 months ago

The problems in the Canadian department store industry make the U.S. look quite healthy by comparison. Eaton’s is gone completely (after a last ditch rescue effort by – ironically – Sears Canada), HBC is the subject of never ending grumbling by analysts. Sears – the remaining player in the triumvirate – might seem to be in a good position just by default: perhaps the thinking is that, with 100% backing of Sears U.S., Sears Canada can solidify it’s position.

But without more detail of how that is to be achieved, any takeover is bound to be viewed as having ulterior motives; for example, it may be simply a real estate ploy, ultimately allowing an upscale U.S. operator – read “Federated” – to enter the key Canadian markets…. something both long hoped-for and dreaded (depending which side of the counter you were on).

Chris Davis
Guest
Chris Davis
15 years 3 months ago

Now that the crown jewel of Sears Canada, the credit division, has been sold, there is little left to justify a share price of more than $7 or $8. Some smaller pieces, such as real estate holdings and their wholly owned trucking company, may add a few more dollars to Lambert’s coffers, but all that’s left is an underperforming retail division, a catalogue division plagued by crippling return rates, and an off mall business that loses money. Expect a sale of the remains, in 2006.

Mark Barefield
Guest
Mark Barefield
15 years 3 months ago

Sears Canada was an embarrassment to Alan Lacy. Under former head, Mark Cohen, SC was producing monthly and quarterly increases in same-store-sales while the US stores were grinding out single digit declines. The solution to this unpleasant situation was to axe Cohen for “philosophical and strategic differences,” if I remember the quote correctly. Since Cohen’s departure, SC has fallen in line with the home office, i.e. finance people and not merchants are running the show.

The real reason for the announcement is to draw attention away from the 3rd quarter sales and earnings that are due to be reported on Tuesday. Those numbers are expected to be bad, worse than 2nd quarter results. One can only speculate what will be announced prior to 4th quarter numbers that are trending toward scary.

Joseph Peter
Guest
Joseph Peter
15 years 3 months ago

Mark is correct. On recent visits to Toronto, I was sure to check out the malls. Sears Canada is positioned much differently than Sears here in the USA. Sears Canada markets more higher end fashion products than here. Also, top line cosmetics and fragrances found at most Field’s, Macy’s and Carson’s here in the USA are easily found at Sears Canada. On my visit, the only Nordstrom/Saks/Neiman Marcus type of retailer above Sears and The Bay (Hudson Bay Co.) was Holt Renfrew….so Sears really doesn’t have huge competition at Mall Level…..Their main competitor is The Bay Department store….which seems to run a fine operation.

Off the mall competition to Sears Canada is Wal-Mart…but Wal-Mart is not as strong in Canada, at least from what I observed when I visited their stores. Now what if Kohl’s or Penney’s decides to go Canadian??….We have a different story!

To make a long story short, I think Sears Canada would be run better as a separate company with Canadian interests running it.

James Tenser
Guest
15 years 3 months ago

With limited information available, it’s tricky to sort out the motivations behind Sears’ offer. Consolidation of control over its brand(s) may be one. There may be a pan-North American strategy in play. Knowing what we know about Ed Lambert, there is likely a real-estate/finance component. Speaking hypothetically, if management was planning to sell off Sears in piece-meal fashion (brands and real estate) to maximize returns, it could be inconvenient to have a major licensee (i.e. Sears Canada) on the scene.

Don Delzell
Guest
Don Delzell
15 years 3 months ago
Cogent comments! I did product development for Canada for a number of years, and it is NOT the United States, as has been stated. The retail structure is very different as well. Wal-Mart Canada IS dominating the lower income segment in a similar fashion to the US. However, there has never been a strong moderate department store competitive niche. Canadian apparel is well served by specialty stores, and fashion is very, very, very different between Toronto, Vancouver, and Montreal. Sears is as well positioned in this market as it could be. And by far a better competitor, with a stronger presence, more equity, and higher consumer confidence than the US version. Operationally, the chain is marginally better than the US, although it has attempted process efficiency initiatives over the past 10 years. The only reason I can see to possibly own 100% of the chain would be to make a real estate transaction easier and cleaner. We’ll see. If in the next few months someone turns up to buy the entire chain, or several someone’s,… Read more »
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