Sears Canada's Largest Stockholders Call Off Joint Bankruptcy Bid
July 28 2017 - 10:18AM
Dow Jones News
By Andrew Scurria
Eddie Lampert and Bruce Berkowitz called off a potential joint
bankruptcy deal for Sears Canada Inc., clearing the way for other
bidders to challenge its two largest shareholders.
The two hedge-fund managers on Friday terminated a joint legal
engagement ahead of an Aug. 31 bid deadline. ESL Partners LP, the
hedge fund operated by Mr. Lampert, also said it might sell "some
or all" of its 45.3% Sears Canada stake to generate a tax loss for
its investors.
For Mr. Lampert in particular, the announcement marks a rare
retreat from the Sears brand name after pumping billions of dollars
into both the Canadian and U.S. namesakes in the face of widespread
disruptions upending the retail industry. ESL may consider other
potential financing transactions or sale agreements involving Sears
Canada, according to the announcement.
Mr. Berkowitz's Fairholme Capital Management LLC has also
wagered heavily on a retail revival, increasing its Sears Canada
stockholdings in the quarters leading up to the June bankruptcy
filing. He told investors a week after the insolvency proceedings
began that his 21% Sears Canada stake would still be worth an
estimated $7 per share after the company emerged from court
protection.
ESL and Fairholme said this month they were teaming up to
develop "a potential negotiated transaction" with Sears Canada,
which was spun off from Sears Holdings Corp. in 2012. The U.S.
entity, chaired by Mr. Lampert, also owns a 12% stake in Sears
Canada.
More than 20 potential bidders had expressed takeover interest
in a possible bankruptcy sale.
Sears Canada filed for court protection under the Canada's
Companies' Creditors Arrangement Act, the equivalent of chapter 11
bankruptcy in the U.S. The company said it planned to leave
bankruptcy "as soon as possible" this year and shed costs by
closing roughly a quarter of its stores and laying off some 2,900
employees.
Sears Canada, one of the largest multiformat retailers in
Canada, has a 225-store footprint across the country and employs
roughly 17,000 people.
Write to Andrew Scurria at Andrew.Scurria@wsj.com
(END) Dow Jones Newswires
July 28, 2017 10:03 ET (14:03 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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