Sign in Subscribe
Insurance industry

Sears' Historic Repositioning Efforts Yield Billions in Value for Shareholders

Strategic Insights

— 2 min read

Sears, Roebuck and Co. underwent a major transformation in the early 1990s, executing a series of repositioning programs that resulted in significant value creation for its shareholders. The strategies, which included the spin-off of several major businesses, led to a remarkable increase in Sears' common stock value and market capitalization. Since 1990, Sears' common stock value, including the effect of the Dean Witter spin-off dividend, rose from $22 per share to more than $70, and market capitalization grew from $7.5 billion to over $28 billion.

Key Takeaways:

  • Sears sold 20% of Dean Witter, Discover & Co. through an initial public offering (IPO) in March 1993, raising gross proceeds of about $906 million.
  • The company spun off its 80% interest in Dean Witter, Discover & Co. through a special tax-free dividend to Sears common shareholders in June 1993, making it the second largest spin-off dividend in U.S. history.
  • Sears sold its Coldwell Banker Residential Group to The Fremont Group in October 1993 and its Sears Mortgage Banking Group to PNC Bank Corp. in November 1993, generating over $1 billion in proceeds.
  • The company transferred ownership of Sears Tower and its related mortgages to a trust in November 1994, eliminating $850 million of debt and resulting in a $195-million after-tax gain for Sears.
  • Sears shareholders overwhelmingly approved the company's proposal to spin-off its 80% ownership in Allstate to Sears common shareholders through a tax-free dividend in March 1995.
  • The spin-off of Allstate, valued at $11.1 billion at the time, was the largest company to be spun off in U.S. history.

Statistics:

  • Sears' common stock value increased from $22 per share in 1990 to over $70 by 1995.
  • Market capitalization grew from $7.5 billion in 1990 to over $28 billion by 1995.
  • Gross proceeds raised from the Dean Witter and Allstate IPOs, and the sale of the Coldwell Banker Residential and Sears Mortgage businesses, exceeded $4 billion.
  • Sears' after-tax gain from the transfer of Sears Tower and its related mortgages was $195 million in the fourth quarter of 1994.

Sources:

  • Sears' Backgrounder: Sears Repositioning Programs
  • Business Wire, "Sears, Roebuck and Co. To Decline Their 80.3 Percent Ownership of The Allstate Corporation" (June 20, 1995)
  • Business Wire, "Sears, Roebuck and Co. Announces Major Restructuring of Its Merchandise Group" (Jan. 25, 1993)
  • Business Wire, "Sears, Roebuck and Co. Announces Sale of Sears Mortgage Banking Group to PNC Bank Corp." (May 11, 1993)
  • Business Wire, "Sears, Roebuck and Co. Announces Sale of Coldwell Banker Residential Group" (May 13, 1993)

Read more