Toronto, Ontario, October 25, 2006--The fate of Sears Canada Inc. is set to be decided in a proxy battle between the Canadian retailer's U.S. parent company and a group of New York-based hedge funds, according to the National Post.
Sears Holdings Corp. is attempting to push through its $899-million takeover of the Canadian subsidiary by holding a special shareholders' meeting on Nov. 14. According to a circular distributed yesterday, Sears Holdings is offering $17.94 for each Sears Canada common share, down from $18 offered in the original bid last April.
The Ontario Securities Commission granted the giant Chicago-based retailer permission to schedule the meeting to buy the remaining 46.2% equity stake it doesn't own after a confidential hearing last week, despite the objections of a group of dissident shareholders.
"Sears Holdings is pleased the OSC agreed with us that the meeting should be allowed to proceed," said Mark Gelowitz, a lawyer representing the parent company.
William Ackman, president of New York-based Pershing Square Capital Management LP, accused Sears Holdings of trying to unfairly "squeeze out" minority shareholders with a low-ball offer that is 20% less than the current trading price.
"We are disappointed that both Sears Holdings and Sears Canada continue to game the system by trying to cram down an unfair price on all Sears Canada minority shareholders," Mr. Ackman said in a statement yesterday.
Sources say Mr. Ackman, who pressured the OSC last spring into examining whether all Sears Canada shareholders were being treated equally, is puzzled that Sears Holdings has been granted approval to proceed with a vote even though the regulator ruled on Aug. 8 that the takeover offer was "abusive and coercive" to minority shareholders.
He even appealed directly to other Canadian provincial securities commissions to pressure the OSC into refusing the request by Sears Holdings.
Mr. Ackman and his group of dissident shareholders, which include New York-based hedge funds, including Pershing, Hawkeye Capital Management LLC and Knott Partners Management LLC, also accuse Sears Holdings and its chairman Edward Lampert, a billionaire hedge-fund magnate, of "disenfranchising" minority shareholders by calling a meeting with the minimum of 21-days notice, as required by Ontario securities laws.
In his release yesterday, Mr. Ackman said Sears Canada shareholders may not have sufficient time to cast their votes by attending the meeting or by proxy through their brokers or nominees.
More importantly, Sears Holdings only needs to acquire a majority of the minority shares represented at the meeting -- not from the company's total outstanding shares. According to Mr. Ackman, Sears Holdings may be able to vote 29.7% of the 34.78 million minority shares eligible heading into the meeting.
The disgruntled shareholder group needs 17.4 million shares to block the privatization effort and Mr. Ackman says his group already owns 10.1 million.
As a result, he implored all Sears Canada shareholders to cast a vote by either attending the Nov. 14 meeting or by
