Sears Holdings Corp (SHLD.O) said Friday it may sell up to 300 stores to a real estate investment trust in a move that would spin off prized assets to shareholders and could accelerate a breakup of the retailer by billionaire Chief Executive Eddie Lampert.
Shares of the retailer rocketed 34 percent to $43.71 as investors cheered the possible influx of cash at a time when the company, hampered by sluggish sales, is losing about $7 million a day.
Sears said it was considering a sale of 200 to 300 of its stores to a newly created real estate investment trust (REIT), which would then lease the properties back to Sears. Shareholders would be offered rights to buy shares in the REIT in proportion to their ownership of Sears stock.
The move is the latest in a series of unusual transactions between the company and CEO Eddie Lampert, who has through his hedge fund in recent months subscribed to two rights offerings and anchored a $400 million loan. Lampert owns 48.5 percent of Sears and is expected to invest that proportion in the REIT.
It also would represent the most significant effort to date to cash out of prime real estate, widely considered the company's crown jewel. Sears has spun off a series of operating units and has struck leasing deals, including one last month with European retailer Primark, but it has left many valuable properties untouched on its balance sheet.
"It's essentially been a slow breakup," said Chad Brand, president of Peridot Capital Management, which owns Sears bonds. "It is obviously being accelerated now."
Sears also said it sold a full-line store in Cupertino, California, for $102.5 million in October.
The company, which has booked losses for nine straight quarters, has been scrambling to raise cash to build inventory for the holiday shopping season and to ease suppliers' worries over its financial health.
Sears said last month that it would raise as much as $625 million through an unsecured loan and equity warrants, much of which would be purchased by Lampert's fund.
Sears has also raised about $300 million through a rights offering of part of its stake in Sears Canada (SCC.TO). Lampert has invested heavily in that deal, which closes on Friday.
Sears said it expected to lose between $590 million and $630 million on a net basis in the fiscal third quarter ending Nov. 1, compared with a loss of $497 million a year earlier. It will report its finalized quarterly results on Dec. 4.
For the quarter, the company said same-store sales rose 0.5 percent at its Kmart stores, while they fell 0.7 percent at Sears stores in the United States. By comparison, rival J C Penney Company (JCP.N) is projecting low single digit percentage growth in comparable sales for the quarter ending last month.
(Reporting by Nathan Layne in Chicago and Sruthi Ramakrishnan in Bangalore; Editing by Don Sebastian, Jilian Mincer and Phil Berlowitz)