Sears 2014 Annual Report Download - page 4

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cleaning, air duct cleaning, and garage door installation and repair) provided through Sears Home
Improvement Services and Sears Home & Business Franchises.
Sears Canada Rights Offering
On October 2, 2014, the Company announced that its board of directors had approved a rights offering of up to
40 million shares of Sears Canada Inc. ("Sears Canada"). The subscription rights were distributed to all stockholders
of Holdings, and every stockholder had the right to participate on the same terms in accordance with its pro rata
ownership of the Company's common stock. In connection with the rights offering, each holder of Holdings'
common stock received one subscription right for each share of common stock held at the close of business on
October 16, 2014, the record date for the rights offering. Each subscription right entitled the holder thereof to
purchase their pro rata portion of the Sears Canada common shares being sold by Holdings in the rights offering at a
cash subscription price of Canadian $10.60 per whole Sears Canada share, which was the closing price of Sears
Canada's common shares on September 26, 2014, the last trading day before the Company requested Sears Canada's
cooperation with the filing of a prospectus regarding the rights offering.
On October 16, 2014, ESL Partners, L.P. and Edward S. Lampert, our Chairman and Chief Executive Officer
and Chairman and Chief Executive Officer of ESL Investments, Inc., and related entities (collectively "ESL")
exercised a portion of its pro rata portion of the basic subscription rights to the offering. Accordingly, we sold a total
of approximately 18 million common shares of Sears Canada to ESL, for which we received approximately $169
million in proceeds. After the sale of Sears Canada shares to ESL on October 16, 2014, the Company was the
beneficial holder of approximately 34 million shares, or 34%, of the common shares of Sears Canada. As such, the
Company no longer maintained control of Sears Canada resulting in the de-consolidation of Sears Canada.
The Sears Canada rights offering closed on November 7, 2014 and was oversubscribed. Accordingly, the
Company sold a total of 40 million common shares of Sears Canada and received total aggregate proceeds of $380
million for the rights offering by the closing date. Proceeds from the rights offering provided additional liquidity to
Holdings during the 2014 holiday period and were used for general corporate purposes. At January 31, 2015, the
Company was the beneficial holder of approximately 12 million, or 12%, of the common shares of Sears Canada. At
both February 1, 2014 and February 2, 2013, Sears Holdings was the beneficial holder of approximately 52 million,
or 51%, of the common shares of Sears Canada.
In addition, since the Company has retained an equity interest in Sears Canada, the operating results for Sears
Canada through October 16, 2014 are presented within the consolidated operations of Holdings and the Sears
Canada segment in the accompanying Consolidated Financial Statements in accordance with accounting standards
applicable to presentation of financial statements.
Separation of Lands' End, Inc.
On April 4, 2014, we completed the separation of our Lands' End business through a spin-off transaction. The
separation was structured to be tax free to our U.S. shareholders for U.S. federal income tax purposes. Prior to the
separation, Lands' End, Inc. ("Lands' End") entered into an asset-based senior secured revolving credit facility,
which provides for maximum borrowings of approximately $175 million with a letter of credit sub-limit, and a
senior secured term loan facility of approximately $515 million. The proceeds of the term loan facility were used to
fund a $500 million dividend to Holdings and pay fees and expenses associated with the foregoing facilities. We
accounted for this spin-off in accordance with accounting standards applicable to spin-off transactions. Accordingly,
we classified the carrying value of net assets of $323 million contributed to Lands' End as a reduction of capital in
excess of par value in the Consolidated Statement of Equity (Deficit) for the year ended January 31, 2015.
Additionally, as a result of Mr. Lampert's role as our Chairman and Chief Executive Officer, and Chairman and
Chief Executive Officer of ESL, and the continuing arrangements between Holdings and Lands' End (as further
described in Note 15 of Notes to Consolidated Financial Statements), Holdings has determined that it has significant
influence over Lands' End. Accordingly, the operating results for Lands' End through the date of the spin-off are
presented within the consolidated continuing operations of Holdings and the Sears Domestic segment in the
accompanying Consolidated Financial Statements.
In connection with the separation, Holdings and certain of its subsidiaries entered into various agreements with
Lands' End under the terms described in Note 15 of Notes to Consolidated Financial Statements.