Spinoff Odds & Ends: Sears Canada, CSRA And More

It’s been awhile since we last posted so lets share a few links to ease ourselves back in. We hope to be back at it in two weeks from now.

1. Spinoffs that go bust often lead to lawsuits, in many cases by its creditors. We recently highlighted an example at Noble (NE), but it’s not the only one out there. A group of creditors at Sears Canada are going after Eddie Lampert and his hedge fund, ESL Holdings, in an attempt to claw back some of billions of dollars of dividends he has accrued over the years. The creditors have asked the court to install a trustee to examine dividend payments totaling over $3b (since 2005) made to Mr. Lampert and his fund. Oh Sears (SHLD)…where to even start? While there is plenty of research about spinoffs outperforming the market, Sears has certainly proven to be an exception to the rule. Much like the parent company, the spinoffs have been utter disasters. Both Orchard Supply and Sears Canada are bankrupt and Sears Hometown & Outlet is basically there as well. Although Lands End started strong, it too isn’t looking too hot. Only Seritage Growth Properties (SRG), which counts Warren Buffett as an investor, has held onto its initial value, but that is a pretty low bar for success. Speaking of the Oracle of Omaha, remember when Mr. Lampert was hailed as ‘the next Warren Buffett’? Yeah, neither do we. As a postscript, Yet Another Value Blog had some interesting things to say about Sears as well.
2. Bidding war! At the end of February we noted that CSRA (CSRA), a member of Mohnish Pabrai’s Spinoff Portoflio, had received an offer from General Dynamics (GD). The company has since attracted an unsolicited bidder, CACI (CACI), in an attempt to wrest the company from General Dynamics. The bid was a mix of cash and stock, but some questioned if CACI was biting off more than it could chew. Bloomberg suggested that General Dynamics didn’t have to sweat the higher offer and it didn’t. GD slightly raised its all cash offer by $0.50 to $41.25 per share and it seems to have worked. Every little bit counts and the shares are trading slightly higher than the offer, but I probably would have sold already.
3. Clark Street Value has posted a number of updates to his analysis on the upcoming Spirit Realty (SRC) and Wyndham (WYN) spinoffs that are worth taking a look at. Always thoughtful analysis.

Disclosure: Author holds no position in any stock mentioned.