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U.S. parent company puts embattled Sears Canada on the block to raise more cash

Sears Holding Corp. is in desperate need of cash, and it recently raised cash more than $500 million from its spinoff of Lands' End, receiving the cash in dividend form prior to the spinoff, said Forbes. The cash it raised from Lands' End was not enough, and yesterday, the parent company said it is contemplating the sale of Sears Canada Inc., according to the Globe and Mail of Canada.

A shopper leaves the Sears store in the Loop on Jan. 22, 2014 in Chicago, Illinois. Sears has announced that it plans to close the money-losing flagship store which opened in the downtown location in 2001. Sears is discussing divesting in Sears Canada.
Photo by Scott Olson/Getty Images

Sears Holdings Corp. said it is "exploring strategic alternatives for its 51% interest in Sears Canada, including a potential sale of Sears Holdings’s interest or Sears Canada as a whole." The sale will do two things: raise cash and stop some of the bleeding of cash from the Canadian retailer.

The parent company said Sears Canada’s board and management "intend to co-operate fully with Sears Holdings in this process to achieve value for all shareholders." Sears Canada has been struggling in a tough retail market, selling valuable real estate including prime store leases.

Over the past year, it has sold leases to seven stores, including the Toronto Eaton Centre location, for a total of $591-million in proceeds. The divestiture of a stake in a real estate joint venture added an additional $315-million. Thousands of employees have also been let go.

The company has said it is also considering "strategic alternatives" for Sears Auto Centers, the goal would be to raise even more cash.

Sears Holdings Corp., based in Hoffman Estates, Ill., is controlled by hedge fund billionaire Edward Lampert. Since taking over in early 2013 as CEO, Edward Lampert has touted the company’s transition to a membership-based model, "Shop Your Way" rewards program.

Last month, Sears Canada chief executive officer Douglas Campbell told shareholders at the annual meeting that there were no plans to vacate more stores and that the priority was improving operations and efficiencies.

Part of Sears Canada’s corporate strategy is a greater emphasis on apparel.

Sears Holdings said on Wednesday it plans to hire an investment banker as an adviser.

Sources:

Forbes - Sears Completes Lands' End Spinoff

Globe and Mail - U.S. parent company puts embattled Sears Canada on the block