Coporate Divorce of Sears and Lands’ End

BMGT 110-0201

Homework 2

                    COPORATE DIVORCE OF SEARS AND LANDS’ END

                   Company Spin-offs are the new corporate trend.  According to an article by the “The Buzz” on CNN Money, “ Corporate divorces may not be as juicy as celebrity breakups, but are all the rage these days”.  From EBay to Sears and now Hewlett Packard, there have been a good number of spin-offs in the past years.  These companies advocate that most investors prefer a more focused, nimble company. A corporate divorce is a process in which a company or the subsidiary of a parent company separates to become an independent company through sale or distribution of new shares of an existing company or division of the parent company. In this paper, I will focus on the corporate divorce between Sears and Lands End, which occurred in April 2014.  Sears Holding Corporations is an American multinational holding company headquartered in Hoffman Estates, Illinois. It acquired Land end in 2002 before the formation of Sears Holdings. The subsequent paragraphs will aim at discussing the divorce process, analyzing the divorce to determine if it could and should be saved and finally to discuss the next steps for both Sears and Lands End.

                  The divorce process between Sears and Lands End began with a formal announcement in October 2013.  After that, in December 2013, Sears Holding Corporation announced that it filed a registration statement on Form 10 with the Securities and Exchange Commission. Sales have been dropping since Sears and Kmart were combined in an 11 billion deal in 2005.  In an effort to turn things around, Sears has been spinning off assets and closing stores for the past few years. Lampert, the chief Executive of Sears asserted that the spinoff will not raise cash for Sears but will allow executives to more efficiently chart a course for the two businesses, which compete for management time and capital within the sears group. So In effect, the spin off will make management of both Sears and Lands End cost and time effective.

                    The next step of the divorce process was determining how the spin off would be undertaken in terms of shares of the subsidiary company. Sears said in it’s registration filing that the spin off will be through a pro rata distribution of all the shares of common of stock Lands’ End Inc. They stated their expectations in connection to the spin off and it said that, it is expected that the spin off will be tax-free to U.S stockholders except for any cash received in lieu of fractional shares and the spin-off is subject to approval. The spin-off is subject to the approval of the Board of Directors of Sears Holdings and the satisfaction of certain other conditions. Sears Holdings may, at any time until the spin-off, decide to abandon the spin-off or modify or change the terms of the spin-off. Holders of Sears Holdings common stock as of the record date for the spin-off will not be required to make any payment, surrender or exchange any shares of Sears Holdings common stock or take any other action to participate in the spin-off.