Sears Strengthens Defenses Against Possible Bid from Philip Green with Sale of Store Card Business

Strategic Insights -

Sears, the US-based retailer, is seeking to bolster its defenses against a potential bid from Philip Green by selling its store card business at a price above expectations. The company will pay shareholders 141p a share in cash in April, and hinted that disposals of other assets will generate greater value for shareholders. Sears' shares jumped 25p or 13.5% to 310 1/2p, against the market trend.

Key Takeaways:

  • Sears agreed to sell its Creation storecard business to Groupe Cofinoga for £139m, net of expenses, exceeding analysts' forecasts of £100m to £125m.
  • The sale price will be distributed to shareholders, raising the total amount to be paid from £84m to £215m, or 141p a share.
  • Sears is in advanced negotiations to sell several development properties, expecting to realize "significantly in excess" of their book value of £134m.
  • The sale of development properties could raise an additional £150m, leaving a core of clothing chains with properties worth £90m.
  • Sears reported a 1% decline in comparable store sales in the 23 weeks to January 9, while Freemans sales fell 5% in the same period.

Statistics:

  • Sears' shares rose 25p or 13.5% to 310 1/2p.
  • The sale price of the Creation storecard business was £139m, net of expenses.
  • Analysts forecasted a sale price of £100m to £125m.
  • Sears will distribute £215m to shareholders, including £139m from the storecard business sale and £76m from previous disposals.
  • Comparable store sales at Sears were down 1% in the 23 weeks to January 9.
  • Freemans sales fell 5% in the same period.
  • Sears' development properties are valued at £134m, with potential proceeds of £150m.

Sources:

  • "Sears, the retailer, sought yesterday to strengthen its defences against a possible bid from Philip Green, the retail entrepreneur, with the sale of its store card business at a price above expectations." (Source: Financial Times)
  • "The shares leapt 25p or 13.5 per cent to 310 1/2p, against the market trend." (Source: Financial Times)
  • "Sears has agreed to sell its Creation storecard business for £139m, net of expenses, to Groupe Cofinoga, a retail credit card operation part-owned by Galeries Lafayette, the French retailer, and Banque Nationale de Paris, the bank, which is also a shareholder of Cofinoga." (Source: Financial Times)
  • "Sears said it was in advanced negotiations to sell a number of its development properties and it was confident the portfolio would realise 'significantly in excess' of its book value of £134m." (Source: Financial Times)
  • "At Freemans, sales in the 23 weeks fell 5 per cent. Customers returned goods at a higher rate, and gross margins slipped." (Source: Financial Times)