Sears Holdings Corp. said Thursday that it plans to spin off its Orchard Supply Hardware Stores Corp. business as a separate, publicly traded company.
The department store retailer said in a filing with the Securities and Exchange Commission on Thursday that it believes the chain, which runs 89 stores in California, will generate more value for shareholders as a standalone company. Sears shareholders will own 80 percent of Orchard, and the remaining 20 percent will be held by Ares Management LLC. ESL Investments, the Edward Lampert-run fund that also is Sears' majority shareholder, will be Orchard's biggest owner.
Orchard got its start in 1931 as a farmer-run purchasing co-op in San Jose, Calif. and was bought by Sears, Roebuck and Co. in 1989. Orchard recorded net income of $8.7 million on $660.7 million in revenue in fiscal 2010. Its revenue has fallen for several years in a row, though, and its net income has bounced around. In 2008, the company posted a loss of $243.4 million after recording a hefty goodwill impairment charge.
For purposes of calculating a registration fee, Sears valued the Orchard IPO at $82 million. The company didn't specify a target price for the IPO, nor a date for the spin-off. But an IPO process usually takes three or four months, making Orchard likely to go public in September or October. The shares are expected to trade on Nasdaq under the ticker symbol "OSHS."
Sears, based in Hoffman Estates, Ill., said the spin-off still needs final approval from its board.