Sears Holdings boosts stake in Canadian chain

The U.S. parent of Sears Canada Inc. said Friday it will increase its stake in the Canadian subsidiary, a step that could allow it to delist the Toronto-based firm as a publicly traded company.

Sears Holdings Corp. of Chicago has agreed to pay $560 million to increase its ownership in the Canadian department store chain by 17 per cent, to above 90 per cent.

The parent company, which owns both the Sears and Kmart retail chains in the U.S., will pay the Pershing Square group of funds $30 a share.

Pershing is run by activist investor Bill Ackman, who also has a stake in Target Corp., one of the biggest chains of department stores in the United States, and book retailer Borders Group Inc.

The price is slightly more than what Sears Canada's shares closed at Thursday on the Toronto Stock Exchange.

Sears Holdings, headed by financier Edward Lampert, tried in 2006 to take Sears Canada private by offering $18 a share but minority shareholders decided the price was too low.

"The purchases are being made as we consider them to be an attractive investment," Sears Holdings said in a release. The purchase will increase its stake in Sears Canada to 90.4 per cent.

Canadian securities law provides for a majority shareholder with at least 90 per cent of a publicly traded stock to force minority holders to sell provided all are treated fairly.

The announcement came hours before Sears Canada held its annual meeting, where some minority shareholders voiced concerns over more than $1 billion in cash the Canadian retailer has in reserve.

Some had suggested earlier that those funds should be paid out in the form of dividends or reinvested in the company. 

Sears Canada CEO Dene Rogers told shareholders that the company monitors its cash levels and considers various factors, including the economy and potential acquisitions, when deciding what to do with it.

Rogers said that the board does not believe the cash on hand is excessive given the current economy.

Has 33,000 employees

Sears Canada has about 33,000 employees across the country and operates a network of corporate stores and dealer stores, as well as home improvement showrooms and catalogue merchandise pickup locations.

Brian Yarbrough, a research analyst with brokerage Edward Jones in St. Louis, said it's unlikely that Sears will try to sell the assets.

"I definitely think they want to own this," he said.

In its latest earnings results, Sears Canada reported a $128.2-million profit for the fourth quarter, a 29 per cent increase from the year-earlier period.