Sears Holdings Corporation, the company that runs Sears and Kmart, needs to raise some cash to get through the rest of the year. When a person needs cash, they look around the house for things to sell. Sears did that, and what it saw was Sears Canada. The company announced today that it will sell part of its 51% stake in the company to current Sears Canada shareholders. You’ll never guess who’s buying!

Sears is selling its shares in a rights offering, which is when current shareholders have the opportunity to buy more shares at a special low price. For each share they currently own, shareholders can buy one share at the discounted price.

ESL Investments is one of the Sears Canada shareholders taking advantage of this deal, and will scoop up about half of the newly available shares. That name might sound familiar to you: ESL Investments is the hedge fund managed by Eddie Lampert, the manifesto-writing CEO of Sears Holdings. Yes, that would be the same ESL Investments that is lending Sears about $400 million, about one-tenth of what the company needs to maybe pull itself out of a retail death spiral.

The last month or so has been messy for Sears Canada: Sears Holdings tried to auction off its entire stake, but no one was interested. That’s what led to the $400 million loan, and then the CEO of Sears Canada announced last week that he will leave the company at the end of 2014 or when a new CEO is appointed, whichever happens first.

Sears expects to raise about $380 million from the sale of Sears Canada shares, $168 million of which will come from ESL Investments.

Sears to sell most of its Sears Canada stake through rights offering [Globe and Mail]
Sears to Sell Most of Stake in Canada Unit to Shore Up Liquidity [Wall Street Journal]

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