Toronto, Ontario, February 23, 2006--Sears Canada Inc., urged its shareholders to reject the C$835.4 million ($726.4 million) buyout offer from U.S. parent Sears Holdings Corp., as inadequate.
Sears Holdings, the parent of U.S. retailers Sears and Kmart and the majority owner of Sears Canada, mailed its C$16.86 a share offer to shareholders two weeks ago to buy the rest of Sears Canada it does not already own.
Sears Canada said its board considered many factors, including a valuation of its business prepared by Genuity Capital Markets, which set the Canadian retailer's worth at C$19.00 to C$22.25 a share.
Sears Holdings said the valuation ignores the fact that Sears Canada does not own the Sears trademarks and tradenames in Canada.
"The optimistic expectations for Sears Canada's business that form the basis for the valuation report are unrealistic and inconsistent with the increasingly competitive retail market in Canada," Alan Lacy, vice chairman of Sears Holdings said in a statement.
"We remain committed to our C$16.86 offer, which we continue to believe represents a full and fair price for the company."
Sears Holdings, headed by hedge fund manager Edward Lampert, has said its offer represents the best alternative for Sears Canada shareholders and that the recent price surge in shares of the Canadian retailer reflected "unrealistic market expectations for a higher bid."
Sears' offer represents an 8.7 percent premium over the closing share price of Sears Canada on Dec. 2, the last trading day before the offer was made public.
But the stock has traded around C$18 since then, signaling hopes from investors for a sweetened deal.
Earlier this month, Sears Holdings waived the minimum share tender condition of its offer, meaning it was prepared to buy any and all shares tendered, even if it doesn't get 100 percent of the stock.
A major Sears Canada investor, Natcan Investment Management Inc., has already agreed to tender its 9.06 percent stake.
Sears Holdings said when it mailed its formal offer to shareholders on Feb. 9, that unless it takes over its unit, the Canadian retailer will continue to struggle against large U.S. and Canadian retail competitors, like Wal-Mart Stores and Canadian Tire.
In 2005, Sears Canada posted flat sales, while comparable store sales -- a key measure of a retailer's health -- decreased 2.9 percent.
Sears Holdings, which owns about 54 percent of its Canadian unit, has said its offer expires on March 17.
