This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Street Cold on Sears' Canadian Exposure

Investors waiting for big asset sales to revive shares of Sears (SHLD - Get Report) awoke Monday to news of an acquisition.

The retailer unveiled a plan to buy the publicly traded shares of its 54%-owned Sears Canada (SEARF) unit for $715 million.

"A lot of people expected them to be sellers, not buyers," said Morningstar analyst Kim Picciola. "This is certainly not what I was expecting."

Shares of Sears Canada more than doubled 100% this year after it announced the sale of its credit card portfolio to J.P. Morgan (JPM) for C$2.3 billion. The company is in the process of returning proceeds to shareholders via a special dividend of C$18.64 a share.

Investors had also bid up the shares on speculation that once the credit card transaction was completed, Sears Canada would be converted to an income trust, seek to merge with another retailer or be spun off completely from its parent company. The Toronto-based chain slashed payrolls earlier this year and adopted other aggressive cost-cutting measures that smacked of the influence of Ed Lampert, the hedge fund guru with ESL Investments who became chairman of Sears Holdings after orchestrating the merger of Kmart and Sears last year.

But rather than sell Sears Canada, Lampert has chosen to buy. The acquisition price comes out to C$16.86 a share. Sears Canada's stock closed at C$34.10 Friday, but after the C$18.64 dividend its shares had an implied value of C$15.46 apiece before the parent's offer surfaced.

"The offer represents a 8.7% premium over Friday's closing price and a 22.2% premium over the average closing price since Aug. 31, 2005," the date the credit card deal was announced, Sears Holdings said.

"They must see some value in the business that they think they can extract by controlling it," Picciola said. "Rather than sharing it with someone else, they want to take full advantage of the fruits of their labor. They still could sell off some of the assets at some point in time."
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
SHLD $21.29 -2.61%
WMT $72.16 -0.10%
AAPL $122.37 -0.50%
FB $95.21 -1.84%
GOOG $632.59 0.10%

Markets

Chart of I:DJI
DOW 17,745.98 -5.41 -0.03%
S&P 500 2,108.63 +0.06 0.00%
NASDAQ 5,128.7850 +17.0520 0.33%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs