The board of directors of Sears Holdings Corp (NASDAQ:SHLD) announced their approval of the separation of the retailer’s Lands’ End business through a pro-rata spin-off transaction.
Distribution of Land’s End outstanding shares
Sears Holdings Corp (NASDAQ:SHLD) will distribute all of the outstanding shares of common stock of Lands’ End, Inc to the stockholders of common stock of Sears Holdings (except the holders of restricted stock) on a pro-rata basis to execute the spin-off.
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According to the board, the holders of restricted stock that is un-vested as of the record date will receive cash awards related to the shares. The cash awards will be subject to vesting requirements.
The board said the distribution of Lands’ End shares of common stock will be made to the stockholders of Sears Holdings Corp (NASDAQ:SHLD) on record as of 5:30 PM Eastern Time on March 24, 2014 (record date of distribution). The retailer is expected to make the distribution on April 4, 2014.
The stockholders of Sears Holdings Corp (NASDAQ:SHLD) will receive 0.300795 shares of Lands’ End common stock for every share of Sears Holdings common stock held as of the set record date of distribution.
According to the company, the fractional shares of Lands’ End common stock will not be distributed, instead, “fractional shares that Sears Holdings stockholders would otherwise have been entitled to receive after application of the foregoing ratio will be aggregated and sold in the public market by the distribution agent.”
Sears Holdings Corp (NASDAQ:SHLD) explained that the aggregate cash proceeds from the sale of fractional shares will be distributed pro rate to the stockholders entitled to receive fractional shares.
Sears plans after spin-off
Sears Holdings Corp (NASDAQ:SHLD) said Lands’ End will remain listed at NASDAQ Global Select Market under the symbol “SHLD.” The common stock of Lands’ End is expected to be listed on NASDAQ Capital Market under the symbol “LE.”
The board expects that the common stock of Sears Holdings Corp (NASDAQ:SHLD) will be traded in two markets (regular-way and ex-distribution) from a date determined by NASDAQ through the distribution date.
“Sears Holdings common stock that trades on the regular-way market will trade with an entitlement to shares of Lands’ End common stock on the distribution date. Sears Holdings common stock that trades on the ex-distribution market will trade without an entitlement to shares of Lands’ End common stock on the distribution date,” according to the company.
Sears Holdings Corp (NASDAQ:SHLD) expect the entitlements to the shares of Lands’ End common stock that will be distributed in the spin-off will start trading on a “when-issued” market on NASDAQ (date will be determined by the stock exchange based in the distribution date). After that, all Lands’ End shares of common stock and Sears Holdings Common stock will be traded on regular settlement basis or “regular way” market.
Lands’ End will become independent from Sears Holdings Corp (NASDAQ:SHLD) and a publicly traded company. Sears Holdings will not retain any common stock or Lands’ End after the spin-off.
Lands’ End pursuing senior secured revolving facility
Land’s End is pursuing an asset-based senior secured revolving facility in connection with the spin-off. The revolving facility would provide a maximum borrowing of approximately $175 million with a letter of credit sub-limit. It is also pursuing a senior secured term loan facility of approximately $515 million.
Sears Holdings Corp (NASDAQ:SHLD) expects to use the proceeds of the term loan facility to pay a $500 million dividend to a subsidiary of Sears Holdings immediately prior to the completion of the spin-off. It will also pay fees and expenses related to the foregoing facilities of $15 million.