The Deal: Sears Comes to Lands' End Spinoff

NEW YORK (TheStreet) -- Sears Holding SHLD said Friday it plans to spin off Lands' End clothing business as the struggling retailer sheds assets amid slumping sales and dwindling cash reserves.

Shares of Hoffman Estates, Ill.-based Sears were rising 0.4% to $50.19 extending the stock's 2013 gain to 21.3% By comparison, the Standard & Poor 

The spinout, which is subject to final approval by its board and other conditions, is expected to be tax-free for shareholders. Lands' End, a vendor of casual fashion, accessories and footwear, was founded in 1963 and acquired in 2002 for $1.9 billion.

Lands' End traditionally sold its products through catalogs and eventually online, but after being bought by Sears also had a presence in company stores. The company intends to list its shares on the Nasdaq under the ticker symbol "LE."

The unit generated revenue of $1.6 billion in 2012, according to the registration statement filed with the Securities and Exchange Commission, down from $1.73 billion in sales in 2011. Analysts in October estimated the division was valued at about $1.25 billion, or 7.5 times Ebitda.

Hedge fund manager Edward Lampert, who is chairman and CEO of Sears, telegraphed back in October it was considering separating Lands' End and its Sears Auto Center business. The process was described by many as a gradual liquidation of the once high-flying retailer which has seen quarterly sales declining for more than five years.

Evan Mann, senior high-yield analyst at Gimme Credit LLC, wrote Friday that "we continue to view [Sears] as a struggling retailer in the process of undergoing an orderly liquidation."

The company in recent years has sold some assets of Sears Canada Inc., as well as spinning off its home and outlet unit. Other potential sale targets include brands such as Kenmore appliances and Craftsman tools.

Overall, Sears posted sales of $39.85 billion last year, down from $41.57 billion a year prior.

Lampert said earlier in the week that his fund's Sears holdings had been reduced to 48.4%, from 55.4%, after distributing shares to fund investors.

--by Lou Whiteman in Atlanta


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