CONTACT:
Sears Public Relations And Communications
(847) 286-8371
Sears Holdings Mails Offer to Acquire Minority Shares of Sears Canada Rejects Flawed Valuation Report
HOFFMAN ESTATES, Ill., Feb. 9 /PRNewswire-FirstCall/ -- Sears Holdings
Corporation (Nasdaq: SHLD) announced that it is mailing today its offer to
acquire any and all of the outstanding common shares of Sears Canada Inc.
(TSX: SCC), other than those already held by Sears Holdings and its
affiliates, for C$16.86 per share in cash. Sears Holdings currently owns
approximately 53.8% of the outstanding shares of Sears Canada. The offer is
open for acceptance until 8:00 pm Eastern Standard Time on March 17, 2006.
"Our offer represents full and fair value for Sears Canada. We firmly
believe that our offer provides the best alternative for all Sears Canada
shareholders and that Sears Canada's current market price reflects unrealistic
market expectations for a higher bid," said Alan Lacy, vice chairman of Sears
Holdings. "Sears Canada faces an increasingly competitive retail environment
as is evidenced by its disappointing financial and operating performance.
Unless Sears Holdings owns 100% of Sears Canada, Sears Canada will continue to
struggle to compete against large U.S. and Canadian retail competitors and to
make the changes necessary to adapt to this increasingly competitive retail
environment in Canada."
In its takeover bid circular, Sears Holdings outlines several compelling
reasons why shareholders should accept the offer, including:
-- The offer price represents a significant premium to historical prices
and implies a price-earnings multiple that is materially higher than
Sears Canada's historical trading multiples
-- Natcan Investment Management Inc., Sears Canada's largest minority
shareholder with approximately 9% of the outstanding shares, has agreed
to tender all of the shares of Sears Canada that it owns or controls
for the offer price of C$16.86
-- The shares can be expected to trade at a significant discount to the
offer price if Sears Holdings is not successful in acquiring 100% of
the shares
-- There are few, if any, opportunities for shareholders to realize
enhanced value for their shares other than through the offer because:
- Sears Holdings intends to maintain majority control of Sears Canada
for the foreseeable future
- The conversion of Sears Canada to an income trust could have negative
tax consequences to Sears Holdings and therefore Sears Holdings will
not approve such a conversion
- Sears Canada has completed the credit portfolio sale and distributed
most of the related proceeds to shareholders
- Transactions involving the real estate assets of Sears Canada are
unlikely to produce any material value enhancement
While the offer is subject to customary conditions, it is not subject to a
minimum tender condition. Sears Holdings will acquire any and all shares
tendered to its offer prior to the expiration date.
In response to the announcement by Sears Holdings of its intention to make
the offer, the Board of Directors of Sears Canada established an independent
committee to supervise the preparation of an independent formal valuation of
the shares of Sears Canada. As more fully described in its valuation report,
Genuity Capital Markets is of the opinion that, as of February 7, 2006, the
fair market value of the shares is in the range of C$19.00 to C$22.25 per
share. The valuation report is included in its entirety in the takeover bid
circular.
Sears Holdings believes that shareholders of Sears Canada should
critically review the valuation report prepared by Genuity, and when assessing
its relevance, should carefully consider the following factors:
-- The Genuity valuation ignores the critical fact that Sears Canada does
not own the Sears trademarks and tradenames in Canada, including the
Sears name itself, and powerful brands including Kenmore, Craftsman,
and DieHard. Instead, Genuity implicitly assumes that a third-party
purchaser would continue, despite the contrary terms of the existing
license agreement, to have access to the trademarks on a royalty-free
basis or, alternatively, would not require or place value on the
trademarks
-- Genuity places no weight on the arm's length offer price of C$16.86
negotiated between Sears Holdings and Natcan, which holds approximately
9% of the outstanding Sears Canada shares. Further, the valuation
range does not even include this negotiated price
-- Genuity correctly suggests that the most relevant precedent transaction
is the acquisition of Hudson's Bay Company, but then materially
overstates the implied transaction multiple by not adjusting the
multiple downward to reflect the recent sale of HBC's credit card
portfolio
-- Genuity overstates the "excess cash" position of Sears Canada by
failing to recognize that the year-end figures represent the seasonal
high cash position for the business and that there are significant cash
requirements associated with ongoing retail operations
-- Genuity's financial projections assume, without adequate explanation or
support, the immediate reversal of long-term declining sales and
margins trends in the face of an increasingly competitive environment
-- Genuity assumes that the appraised value of the joint venture real
estate properties can be realized immediately and without any discount
despite the fact that there are contractual restrictions on the sale of
the properties and that there is a limited market for such joint
venture interests. Further, Genuity has incorrectly assumed that
sale-leaseback transactions for the owned real estate would yield
significant value creation for Sears Canada
-- Genuity assumes that an income trust conversion is possible without
structural and tax implications although Sears Holdings, a U.S.
corporation, holds a majority of the outstanding shares and could be
subject to negative tax consequences as a result of such a conversion.
Further, Genuity values the "hypothetical" trust at yields determined
by reference to existing Canadian retail trusts that have much better
business prospects than Sears Canada; and finally
-- In forming its views as to fairness, Genuity fails to comment on the
most relevant valuation metric for shareholders - the expected trading
value of the common shares if Sears Holdings does not acquire 100% of
the shares of Sears Canada.
Mr. Lacy added, "The work of the independent valuator does not take into
account a number of factors that are critical to accurately valuing Sears
Canada. As the valuator did not adequately account for these key elements,
shareholders should reject its conclusions. We are confident that
shareholders of Sears Canada will recognize that our offer is a full and fair
price that provides immediate liquidity to all shareholders."
Scotia Capital Inc. is acting as financial advisor to Sears Holdings.
About Sears Holdings Corporation
Sears Holdings Corporation is the third largest broadline retailer in
North America with approximately $55 billion in annual revenues, and with
approximately 3,900 full-line and specialty retail stores in the United States
and Canada. Sears Holdings is the leading home appliance retailer as well as
a leader in tools, lawn and garden, home electronics and automotive repair and
maintenance. Key proprietary brands include Kenmore, Craftsman and DieHard,
and a broad apparel offering, including such well-known labels as Lands' End,
Jaclyn Smith and Joe Boxer, as well as the Apostrophe and Covington brands.
It also has Martha Steward Everyday products, which are offered exclusively in
the U.S. by Kmart and in Canada by Sears Canada. The company is the nation's
largest provider of home services, with more than 14 million service calls
made annually. For more information, visit Sears Holdings' website at
http://www.searsholdings.com .
SOURCE Sears Holdings Corporation
Web site: http://www.searsholdings.com
CONTACT: MEDIA, U.S., Sears Holdings Public Relations,
+1-847-286-8371, or Canada, John Lute of Lute & Company,
+1-416-929-5883; or INVESTORS, Scotia Capital Inc.,
+1-416-945-4508
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