Lampert's Patience Is Rewarded as Sears Holdings Buys More Sears Canada Shares

Vintage Lampert, buying shares of a company he offered to buy for less than he offered two years ago... patience...

From the National Post:

Sears Holdings Corp. (SHLD) continues to add to its nearly 73% stake in Sears Canada Inc. The U.S. retailing giant bought 29,600 shares of its Canadian subsidiary for around $17.85 per share between March 9 and March 10, 2009. This brought SHLD Acqusition Corp.’s holdings in the Canadian retailer to 20,756,173 shares. The transactions follow Sears Holdings Corp.’s purchase of 32,000 shares on Dec. 1, 2008.

In November 2006, Sears Canada shareholders rejected an $888-million bid by its parent after some investors said the $17.97 per share takeover price was too low. However, the potential deal sent Sears Canada shares nearly 50% higher since the offer was made to almost $30 per share.

Now follow this. As of 1/31, Sears Canada (SCC) had 107 million shares out and $891 million in cash on the books or, $8.32 a share. So, Lampert pays $17 a share, and then gets to add the $8.32 a share to Sears Holdings' cash balance because of his ownership percentage for a nice 52% return. Beautiful...

Disclosure: Long SHLD

Comments

[robert99:]

As I watch the Lampert saga with SHLD unfold, I find myself beginning to believe that he will create something valuable out of the staid retailer after all. From what I've read, Lampert is a no-nonsense, value-oriented operator, and that is something I can relate to. I'll need it cheaper though - low 20's sounds about right.

Mar 19 07:40 AM

[sclarksons:]

Todd, thanks for the information.

Robert99,
low 20s would be a market value of 2.7 billion or so.

Sears' artificially low stockholder equity is 10.8 billion.

(I say artificially low due to the write down of kmart assets out of bankruptcy from 9B to less than 500 mil, (can't remember the specs, and the 5 billion in buybacks.)

2.7 billion seems a rather absurd price for the company that could net 4 billion cash for selling its inventory at cost after paying all debt and lease obligations.

so they have 4 billion in cash after that deal, call it three due to salaries and other uncertainties.
then sell the company owned stores for about 500,000 each, that's another 407 million.

now we have 3.4 billion dollars and still have 73% of sears canada and land's end, craftsman, kenmore, diehard, and the online business.

Some smart people write this one off because it is in a dying buiness, mall based retail.

As Buffett says, when the management with a reputation for excellence runs into an industry with a lousy reputation, it is the industry reputation that wins.

However, I would counter that Sears is in the "shareholder value focused holding company" business, not the retail business.

it will be interesting to see what happens...

Mar 20 01:10 AM

[sclarksons:]

other assets I forgot to mention are orchard supply hardware and "delver" whatever they are, and the sears corporate campus in illinois which is probably still worth a hundred million or so, despite the downturn.

lots of the assets are probably on the books at 100 year prices.

Mar 20 01:14 AM

[fcharlie:]

sclarksons,

i agree with what you say about Sears being more of a holding company focused on shareholder value.

Did you read through the 10-K and notice all the transactions made during the year? Buying debt and booking gains, sold Sears store in Calgary for a huge gain, sold Toronto headquarters for a huge gain, bought 9 previously leased stores and distribution centers..... It's funny how once upon a time everyone talked about how Eddie would run SHLD as an investment vehicle, and now that it is becoming obvious that he's really doing that, people just trash him for the stores.

Also, regarding your $500,000 per store... i think that's way to low. I have gone to many county tax websites and found tax values for the stores, the lowest i've ever seen is the Sears in Eastland Mall in Charlotte.... which is being closed next month. It's tax value is $5 million. Most of the stores have a tax value around $9-14 million, and the highest i've ever seen is in Anchorage Alaska, at $25 million.

Mar 20 08:52 AM

[stockdoc06:]

How do you get a 52% return? If he moves the cash then the shares he bought are worth that much less, so it is an unrealized loss. An actual cash loss from Canada would likely result in a real accounting markdown so there is no gain. If you want to get a look at SHLD's future look no further than their unfunded pension liabilities. Lampert may be able to run his accounting tricks to get the company to appear more valuable and sell off assets here and there, but there are a lot of undervalued assets out there right now that don't have bankruptcy looming in their futures.

Mar 23 10:30 AM

[123:]

Todd

30K shares * $18 per share is less than $600,000.

This is an immaterial move. *Beautiful*

Can you please get your nose out of Lampert's a**?

Mar 23 09:02 PM