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Sears' Future Hangs in the Balance as Shell Bid Stirs Uncertainty

Strategic Insights

— 2 min read

The fate of Sears, one of the least loved companies on the stock market, hangs precariously in the balance as a bid from January Investments, a shell financed by the Barclay twins, gains momentum to take the ailing retailer private. Despite the bid's sizeable premium, some shareholders are cashing out, potentially selling short of a counterbid. However, a sum-of-the-parts valuation reveals that the bid still leaves significant value to be unlocked.

Key Takeaways:

  • Sears has underperformed the market by 90% in the decade preceding the bid speculation, prompting some shareholders to cash out.
  • The January Investments bid, priced at 340p per share, may be a starting point for other bidders, given the significant value that could be unlocked through a break-up of the company.
  • Recent disposals account for approximately 150p per share in cash, while the property arm has a net asset value of £134m and should be worth at least 90p per share.
  • The Freemans mail order business, acquired at a planned price of £370m in 1997, is estimated to be worth at least 121p per share.
  • The Sears clothing arm, which made £22m in operating profit in 1997-98, could sell for six to seven times that amount, adding significant value to the company.

Statistics:

  • 90% underperformance by Sears in the decade preceding bid speculation.
  • 340p per share final offer by January Investments.
  • 150p per share in cash from recent disposals.
  • £134m net asset value of the property arm.
  • 90p per share estimated value of the property arm.
  • 121p per share estimated value of the Freemans mail order business.
  • £370m planned acquisition price of the Freemans mail order business in 1997.
  • £22m operating profit of the Sears clothing arm in 1997-98.

Sources:

  • "Sears' 90 per cent underperformance in the decade preceding mid-November's bid speculation explains why some shareholders... are cashing out even before seeing an offer document." (Source: Unnamed article, not explicitly cited)
  • "The closing price of 345p." (Source: Unnamed source, not explicitly cited)
  • "Recent disposals account for about 150p per share in cash." (Source: Unnamed source, not explicitly cited)
  • "The property arm has a net asset value of Pounds 134m, and should be worth at least 90p per share." (Source: Unnamed source, not explicitly cited)
  • "Valuing the now loss-making Freemans mail order business for half of the Pounds 370m Littlewoods planned to pay for it in November 1997 adds another 121p." (Source: Unnamed source, not explicitly cited)
  • "Sears' clothing arm - which made Pounds 22m operating profit in 1997-98 and could sell for six to seven times that - a break-up value should exceed Thursday's bid." (Source: Unnamed source, not explicitly cited)

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