Sears Holdings Corp (NASDAQ:SHLD) filed a regulatory filing with the Securities and Exchange Commission (SEC) indicating its decision to divest Land’s End through pro rata distribution of all the shares of the common stock of the business.
The embattled retailed expect that the divestiture of its Land’s End business will be tax-free to all shareholders based in the United States except for any cash received from fractional shares. The proposed spin-off is subject to the approval of the board of directors of Sears Holdings Corp (NASDAQ:SHLD). The company also said it could abandon or change the terms of the spin-off any time.
Sears Holdinsg Corp (NASDAQ:SHLD) also owns K-Mart and Sears department stores. The company had been selling the assets of both brands over the past several years in an effort to revive its business. Edward Lampert is the founder, chairman and CEO of the company. In 2005, Lampert merged Sears with K-Mart in a $12 billion transaction. Since then, the sales of company continued to decline. Its stock price fell by more than 70% from its highest level in 2007.
Lampert’s hedge fund, ESL Investments own 48% stake in Sears Holdings Corp (NASDAQ:SHLD). Yesterday, Lampert said, “My significant personal ownership in the company is a sign of my confidence and alignment with all shareholders.” He also emphasized that the management will continue its focus in transforming Sears Holdings into a membership-focused company and on creating value for shareholders.
In October, Sears Holdings Corp (NASDAQ:SHLD) already announced that it was considering the idea of separating its Land’s End business and selling Auto Center. Matt McGinley, managing director at International Strategy & Investment Group estimated that the company could raise as much as $2.5 billion from the two businesses. The company acquired Land’s End for $1.9 billion in 2002.
Credit Suisse analyst Gary Balter commented in his note to investors that the “spin-off announcement essentially points to a number of negatives including an inability to find a buyer, as previously Land’s End was listed as an asset that the company would monetize.”
On the other hand, Belus Capital Advisors CEO, Brian Sozzi commented, “Sears is in a steady state of decline. They’re essentially selling their body parts so they stay alive today.”
Meanwhile, Craig Johnson, president of Customer Growth Partners opined that Sears Holdings Corp (NYSE:SHLD) will only recover it will remove Lampert from his position. He said, “First of all, you need a CEO who’s a retailer. Eddie’s not a retailer, he’s a value guy. Until you put a retail guy on top of the company, the decline is inevitable. But, no one’s going to come in as a nominal CEO if he still owns a controlling share either.”
The stock price of Sears Holdings Corp (NYSE:SHLD) declined more than 3% to $48.09 per share on Friday.