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But it was already a US-owned (majority) company. I don't think it will really change anything...
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Sears goes shopping -- for the rest of Sears Canada
December 6, 2005
BY SANDRA GUY Business Reporter

Sears' largest shareholder, hedge-fund guru Edward S. Lampert, left experts scratching their heads again Monday after Sears announced it had agreed to buy Sears Canada and operate it as a subsidiary.

Sears Holdings already owns 53.8 percent of Sears Canada's shares, but most analysts had predicted that Sears would sell its stake in its Canadian sibling rather than acquire it.

Yet the takeover would repeat a common Lampert tactic: Sears shareholders gain a dividend payment, while the retailer pumps out a sharp improvement in earnings and sheds massive amounts of jobs and costs.

Sears offered $718.5 million for the Canadian company's shares, an 8.7 percent premium over Friday's closing stock price. A major Canadian shareholder, Natcan Investment Management, has agreed to support the deal by tendering its stake of more than 9 percent of Sears Canada's outstanding shares. The deal is expected to close in the first three months of 2006.


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The deal calls for Sears' shareholders -- Lampert is the biggest single shareholder -- to gain a one-time dividend payment from the sale of Sears Canada's credit-card business to JPMorgan Chase & Co.

In many ways, the Canadian deal aims to achieve the same kinds of cost cuts and cost savings as Lampert envisioned when he engineered Kmart's $12.3 billion buy of Sears Roebuck on March 24.

Sears can wield its larger size to squeeze cost savings from suppliers in Canada, and to use the two retailers' North American distribution network more efficiently.

Lampert will take charge, getting rid of many of Sears Canada's executives and their administrative functions.

And Sears Canada will no longer report its finances in the detailed way it did as a standalone company.

The cost-cutting would make Sears a more viable rival in Canada against competitors such as Wal-Mart, Lowe's and Home Depot, which are growing in Canada but aren't as deeply rooted there as they are in the United States.

"If Sears centralizes lots of Sears Canada's functions, it would save a fortune," said Howard Davidowitz, chairman of Davidowitz & Associates, a retail-consulting and investment-banking firm based in New York.

Sears could also save money by putting the same merchandise in its Canadian stores as it does in the United States, and vice versa, opening the way for Martha Stewart Living to take a bigger presence in Sears stores here. Sears Canada has sold Stewart's home furnishings for more than two years.

Sears took a similar step in the United States Monday by naming executives to oversee merchandising for both Sears and Kmart. The executives, Peter Whitsett and Dan Laughlin, will report directly to Lampert.

Analysts played a guessing game Monday about Lampert's other interests in Sears Canada: Lampert may want to fend off a rival suitor for Sears Canada; sell Sears Canada's real estate; set up Sears Canada for a merger with fellow Canadian retailer Hudson's Bay, or simply realize a tax advantage.

Lampert long ago declared he was less interested in sales results than in realizing profits.

Indeed, sales at Sears stores open at least a year -- a key measure of retailing strength -- are expected to have declined when Sears reports earnings today. Sears Canada reported in October that its same-store sales in the third quarter dropped 8.2 percent from a year earlier.