Court denies Sears Holdings appeal vs. OSC decision on Sears Canada takeover vote

Hey there, time traveller!
This article was published 14/11/2006 (7081 days ago), so information in it may no longer be current.

TORONTO (CP) – American retail giant Sears Holdings Corp. (NASDAQ:SHLD) is backing away from its bid to privatize Canadian subsidiary Sears Canada (TSX:SCC) after minority shareholders rejected the takeover Tuesday.

Sears Canada’s minority shareholders soundly defeated a proposed share consolidation, voting 61.5 per cent against the resolution that would have given 100 per cent control to Sears Holdings.

While 81.3 per cent of Sears Canada’s shares were voted in favour of the proposed going-private transaction, a large portion could not be included because of an Ontario Securities Commission order – which was upheld by an Ontario court shortly before the vote Tuesday.

“Notwithstanding that the going-private transaction received favourable votes from holders of a majority of the Sears Canada minority shares, the transaction is considered not to have received the ‘majority of the minority’ approval required for the transaction to proceed,” Sears Holdings said in a statement.

The company said it expects “that its offer will expire on Nov. 27, 2006, without any other adjustment to its terms.”

Sears Canada’s shares soared more than seven per cent, or $1.65, to $24.90 in early-afternoon trading on the Toronto Stock Exchange.

Richard Rubin, managing partner for Hawkeye Capital Management LLC, one of the minority shareholders opposing the takeover, called it “a great day for minority shareholder rights in Canada.”

“We felt strongly enough to join together with other shareholders, and that, if we weren’t receiving fair value, that Sears Canada should remain a public company.”

Sears Holdings owns 54 per cent of the Canadian unit but can’t take it private unless the holders of a majority of Sears Canada’s minority shares approve the deal that values the firm at nearly $1 billion.

Hawkeye, along with Knott Partners Management LLC, Glass, Lewis & Co. and Pershing Square Capital Management LP had recommended the buyout’s defeat, saying Sears Holdings’ $17.94-a-share offer was too low.

On Aug. 8, the OSC ruled that Sears Holdings broke merger rules when it failed to disclose support agreements it struck with the Bank of Nova Scotia (TSX:BNS), its investment banking division Scotia Capital Inc. and the Royal Bank (TSX:RY) in connection with the buyout.

It said the banks’ large shareholdings in Sears Canada – about 15.1 million shares – could not be counted in determining whether the Sears takeover succeeds.

Chicago-based Sears Holdings, who had sought leave to appeal that ruling, said Tuesday it “continues to disagree with the decision of the OSC and continues to believe that the case presented important issues concerning the Canadian rules for takeover bids and going-private transactions that warranted further judicial review.”

The companies have five business days to review the proxies submitted and raise any challenges the vote result.

Sears Canada is a multi-channel retailer with a network of’8 corporate stores,’2 dealer stores, 65 home improvement showrooms, over 1,900 catalogue merchandise pick-up locations, 107 Sears Travel offices and a countrywide home maintenance, repair and installation network.