Sears Announces Spin-Off of Allstate and Divestiture of Homart Development Co.

Sears, Roebuck and Co. has taken significant steps to enhance shareholder value by announcing a spin-off of its 80.1 percent ownership of The Allstate Corporation in a special tax-free dividend to Sears common shareholders. This move, along with the potential divestiture of its Homart Development Co. unit, is expected to create two independent companies with greater flexibility to pursue growth strategies and provide incentives to employees.

Key Takeaways:

• Sears' board of directors has approved a plan to spin off 360 million Allstate shares to Sears shareholders, valued at approximately $9.0 billion, in a special tax-free dividend.
• The distribution of Allstate shares to Sears shareholders is expected to be one of the largest spin-offs in U.S. history, with each Sears share receiving almost one share of Allstate stock.
• Sears plans to file proxy materials for a special shareholders meeting in the spring of 1995, where the spin-off proposal will be considered, and expects to implement the spin-off in mid-1995.
• Edward A. Brennan, Sears' Chairman and Chief Executive Officer, will retire after the spin-off and transition, citing the company's strengths in terms of management, operating performance, and financial strength.
• Arthur C. Martinez, current Chairman and Chief Executive Officer of Sears Merchandise Group, is recommended to succeed Brennan as Chairman and Chief Executive Officer of Sears, Roebuck and Co. after the transition period.
• Jerry Choate will become Chairman and Chief Executive Officer of Allstate, and Edward M. Liddy will become President and Chief Operating Officer, effective January 1, 1995.

Statistics:

• 360 million Allstate shares will be distributed to Sears shareholders, valued at approximately $9.0 billion.
• The new Sears dividend following the spin-off will be $0.92, with approximately 68 cents to come from Allstate, based on its current 72 cent dividend.
• Sears plans to spend $4 billion on a 5-year capital program, with $850 million in debt eliminated through the restructuring of the Sears Tower financing.
• Sears has a strong balance sheet to fund ongoing capital programs and has improved asset productivity through better inventory turnover.

Sources:

• Business Wire, "Sears, Roebuck and Co. Announces Decision to Spin-Off Ownership of The Allstate Corporation" (November 10, 1994)
• Business Wire, "Sears, Roebuck and Co. Announces Plans for Spin-Off and Divestiture of Homart Development Co." (November 10, 1994)