The curtain should fall on a controversial takeover play in the next three months, as the path is now clear for Sears Holdings to buy out the remainder of its Canadian subsidiary.
Sears Canada became a battle ground four years ago, after Sears Holdings and its normally low-profile CEO, Edward Lampert, made an $18-a-share offer to buy the firm. The takeover was opposed as too thin by minority shareholders, with high-profile New York activist fund manager William Ackman at Pershing Square leading the fight.
Pershing Square accumulated 17 per cent of Sears Canada, and after numerous regulatory hearings, was able to block the bid. Both sides retreated to consider their next move. Sears Canada's managers, to their credit, just kept on doing a good job of running the chain.
Late Thursday, Sears Holdings broke the stalemate. Mr. Lampert and his colleagues dished out $30 a share to buy Pershing Square's holding.
For those keeping score, Mr. Ackman won this face off.
With more than 90 per cent of the Canadian subsidiary, Sears Holdings can now squeeze out the remaining investors. The American buyer will need to get an independent valuation done before moving. Investment banking sources expect the entire process to play out within three months. For tax reasons, the deal will likely be structured as an amalgamation of the U.S. and Canadian companies.
One prize that comes with merging these two companies: Sears Holdings will get access to $1.4-billion of cash that's in the coffers of its Canadian unit. That translates into $12.84 of cash for every Sears Canada share.
A number of U.S. companies created publicly traded Canadain subsidiaries in the 1970s. Over time, these companies have been bought out by their parents. Money managers who simply bought stakes in these Canadian plays and waited patiently for the takeovers - hello, Jarislowsky Fraser - made handsome returns.