Sears offers $718.5 million for rest of Sears Canada

~ By JAMES COVERT and ANDY GEORGIADES

NEW YORK -- Sears Holdings Corp. said Monday it agreed to buy the shares it doesn't already own in Sears Canada Inc. for $719 million, to help the retailer manage increasingly stiff competition in Canada.

Sears Holdings, which currently owns 57.7 million shares, or about 53.8 percent of Sears Canada, offered to buy the remaining shares for 16.86 Canadian dollars ($14.52) each.

News of the deal sent Sears Canada's Toronto Stock Exchange shares up $2.20, or 6.4 percent, at 17.71 Canadian dollars, excluding a pending dividend of 18.64 Canadian dollars a share. That indicates that investors expect a higher bid.

Sears said Natcan Investment Management Inc. will throw its 9.7 million shares, or about 9 percent of Sears Canada's outstanding shares, behind the deal.

As a wholly owned unit of Sears Holdings, Sears Canada could benefit from "management direction," as well as cost savings and economies of scale in purchasing and distribution, Sears Holdings spokesman Chris Brathwaite said.

By itself, Sears Canada has "a competitive disadvantage that would not be sustainable over the long term," he said.

Since the arrival in Canada of Wal-Mart Stores Inc. in the mid-1990s, Canadian retailers from supermarkets to department stores have seen their profits pressured.

It isn't getting any easier, with Costco Wholesale Corp. building stores and other U.S. chains including Home Depot Inc. and Lowe's Cos. set to expand in Canada soon, Brathwaite said.

The home-improvement giants already have taken a big toll on Sears in the United States, where they have chipped away steadily at Sears' dominance of the U.S. appliance business.

Sears Canada began as a partnership between U.S. and Canadian retailers Sears Roebuck and Simpsons, which signed a deal to create Simpsons-Sears in 1952.

In 1964, the company launched a five-year expansion campaign, with the goal of putting a store in every city with at least 50,000 people. Its shares began trading on the Toronto and Montreal stock exchanges a year later.

In 1978, department-store operator Hudson's Bay Co. purchased Simpsons, giving it a 35 percent ownership of Simpsons-Sears, a stake it would later sell to Sears Roebuck in 1983.

In 1984, shareholders approved changing the name to Sears Canada, and reclassifying of all the nonvoting and voting stock, which gave Sears Roebuck majority ownership of 62.6 percent of the outstanding shares.