Much like Halloween, the end of the year is also shaping up to be an extremely busy period for spinoffs. The latest to join the party is Sears Holding (SHLD) whose board of directors approved the spin offof Orchard Supply Hardware Stores
earlier this week. The spinoff will take place on December 30 to shareholders as of today, so this is really your last chance to get in pre-spin. Shareholders will receive one common Class A share (yes, there are other classes) and one preferred share of Orchard for every 22.14177 shares of SHLD owned. The preferred shares do not pay any dividends and are not convertible into common. Ares Capital, a private equity firm which purchased a 20% stake in Orchard back in ’05, will own all of the Class C shares and have ~20% of the voting power. As a result of its holdings in SHLD, ESL Investments, Eddie Lampert’s fund, will control ~49% of the voting power so don’t expect too many changes. The new company will trade on the NASDAQ under the ticker OSH and the preferred will be quoted on the OTCQB. Check out the company’s most recent S-1 for additional information on the transaction and see our earlier post about the spin here.
I have not had a chance to research this spin in depth, but the preferred share is an interesting wrinkle. Investors may not be familiar with it and the market to trade it may not be as liquid. We will keep you updated.
Disclosure: Author holds no position in any company mentioned.