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Dianne Tordillo
Dianne Tordillo
Articles (179)  | Author's Website |

ESL Investments’ Lampert Exercises Stock Option for Sears Hometown in Effect of Rights Offering Deadline Completion

October 12, 2012 | About:
Edward Lampert, chairman and majority stockholder of Sears Holdings Corporation (SHLD), has exercised his stock option for corporate spin-off, Sears Hometown & Outlet Stores Inc., according to an SEC filing recorded Oct. 10.

With a conversion rate of .218091, and a derivative conversion price of $3.27, Lampert, along with several others of his private equity funds including RBS Partners LP, ESL Institutional Partners LP and SPE Master I LP, reported owning more than 13.7 million shares altogether, after the transaction. The price after conversion amounted to $15 per share, which was the declared exercise price of the subscription rights pertaining to Sears Hometown’s separation.

The breakup between Sears Hometown and Sears Holdings was announced in February. The rights offering that accompanied the separation was estimated to raise as much as $500 million, and was officially distributed to Sears Holdings shareholders on Sept. 7.

Shareholders were entitled to purchase shares of the Sears Hometown spin-off, under the conversion rate and per share market price mentioned, and under the stock symbol “SHOSR.” Upon completion of the rights offering time frame, Sears Hometown would be traded under the stock symbol “SHOS.” Sears Holdings would continue to be traded under “SHLD.”

Lampert’s decision to exercise the subscription rights after the transaction’s full completion was declared the same day of the separation announcement, intending to purchase the maximum number of shares allocated to ESL Investments under the over-subscription privilege.

The deadline of the offering officially ended at 5 p.m. EST on Oct. 8. Preliminary results indicated that Sears Holdings shareholders pursued more than 95 percent of the outstanding shares of common stock, according to a Sears Holdings press release. Many of the holders who exercised their basic subscription rights in full also purchased additional shares of common stock.

Sears Holdings expects to distribute more than 23.1 million shares of common stock to shareholders who validly exercised their subscription rights and paid the subscription price in full, according to the release. The company’s estimated aggregate gross proceeds amounts to about $346.5 million.

Sears Holdings is currently traded at a market price of $60.36 and has a market cap of 6.04 billion. Its lowest trading price per share so far this year was in January at about $29; its highest trading price so far this year was in March at about $83.

About the author:

Dianne Tordillo
Dianne Tordillo is staff writer for GuruFocus.com. She reports on a variety of financial news, primarily dealing with investor portfolios and stock trades. Her articles also highlight insider trades, as well as the many useful features of GuruFocus.

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