Disposal
July 16 2003 - 3:01AM
UK Regulatory
RNS Number:5992N
Sears,Roebuck & Co
15 July 2003
INVESTOR CONTACT:
Pam White,
Vice President
(847)286-1468
NEWS MEDIA CONTACT:
Edgar P. McDougal
(847)286-9669
SEARS TO SELL CREDIT AND FINANCIAL PRODUCTS BUSINESS
TO CITIGROUP; SEARS TO NET $6 BILLION IN PRE-TAX CASH PROCEEDS
Companies to Establish 10-Year Strategic Alliance
Generating Additional Performance Payments, Cost Savings
HOFFMAN ESTATES, Ill. - Sears, Roebuck and Co. (NYSE: S) today announced it has
entered into a definitive agreement to sell its entire Credit and Financial
Products business to Citigroup (NYSE: C) for approximately $32 billion,
representing approximately a 10 percent premium to Sears' $29 billion gross
domestic credit card receivables portfolio. As part of the transaction, Sears
and Citigroup will also enter into a long-term marketing and servicing alliance
with an initial term of 10 years. The transaction has been approved by both
companies' boards of directors and is expected to close by year-end 2003,
subject to customary regulatory review and closing conditions.
Under the terms of the transaction, at closing Sears will net pre-tax cash
proceeds of approximately $6 billion, which represents approximately a $3
billion premium on receivables and approximately $3 billion of Sears' net
invested capital.
Strategic Alliance
Under the long-term marketing and servicing alliance, Citigroup will provide
credit and customer service benefits to Sears' proprietary and Gold MasterCard
holders. As part of the alliance, Sears expects to receive approximately $200
million in annual performance payments from Citigroup based on items such as new
account and credit sales generation activities. In addition, Sears expects to
realize annual savings of more than $200 million as Citigroup will absorb costs
associated with Sears' zero percent financing program.
Upon completion of the transaction, substantially all of the approximately 8,300
employees of Sears' Credit and Financial Products business will become employees
of Citigroup and Citigroup also will assume ownership of the business' operating
facilities.
"This is a great deal for Sears, its customers and shareholders," said Alan J.
Lacy Sears chairman and chief executive officer. "Our customers will enjoy
broader credit and financial products opportunities and continued high levels of
service, while Sears gains an additional source of profitability and greater
financial flexibility. We are delighted to be involved in a strategic alliance
with Citigroup. They are a world leader in proprietary, co-branded and general
purpose cards, with world class technology, powerful financing capabilities and
excellent customer relationship management skills."
Lacy added, "This strategic action will also create significant value for our
investors by accelerating progress toward building a Sears that is completely
focused on growing our core retail and related services business, further
simplifying our organization, strengthening our financial position and returning
substantial proceeds to shareholders. With the completion of this transaction,
Sears will stand as a focused, well-financed retail leader, with substantial
earnings and a strong balance sheet."
Sears' domestic credit card business includes 59 million total accounts, of
which 23 million are active. This portfolio represents the eighth largest in the
U.S. and includes the largest remaining in-house private label portfolio. Both
the Sears proprietary card and Sears MasterCard will continue to be offered
through Citigroup and the transition will be transparent to Sears customers.
"The combination of Sears' exceptional distribution channel and customer base
and Citigroup's industry leadership position in cards and excellence in customer
service will create powerful new growth opportunities for both companies," said
Robert B. Willumstad, president of Citigroup and chairman and chief executive
officer of Citigroup's Global Consumer Group. "Citigroup looks forward to
delivering even higher levels of service to Sears' 59 million credit card
customers, capitalizing on new opportunities to expand this portfolio, and
leveraging our proven ability to maximize the potential of the card business."
Use of Proceeds
Proceeds from the transaction are intended to be used primarily to retire debt,
return cash to Sears shareholders and for general corporate purposes. After
retirement of debt, the company expects that approximately $4 billion to $4.5
billion in cash will be available. Following the expected distribution, Sears
expects to have approximately $1.5 billion of debt, net of cash reserves held
for future paydown of remaining outstanding debt.
Sears is a leading retailer in the U.S. and Canada, with $35.7 billion in
merchandise sales and services revenues in 2002. The company is the No. 1
retailer of home appliances, fitness equipment and lawn mowers, and holds
leading positions in many other categories. In addition, Sears is the exclusive
provider of several leading brands, including Kenmore, Craftsman, Lands' End and
DieHard. Sears owns a substantial direct-to-customer operation and is the
largest product repair service provider in North America, making 14.5 million
service calls annually.
About Sears
Sears, Roebuck and Co. is a broadline retailer with significant service and
credit businesses. In 2002, the company's revenue was $41.4 billion. The company
offers its wide range of apparel, home and automotive products and services to
families in the U.S. through Sears stores nationwide, including approximately
870 full-line stores. Sears also offers a variety of merchandise and services
through its Web sites, sears.com, thegreatindoors.com and landsend.com, and a
variety of specialty catalogs.
About Citigroup
Citigroup (NYSE: C), the preeminent global financial services company with some
200 million customer accounts in more than 100 countries, provides consumers,
corporations, governments and institutions with a broad range of financial
products and services, including consumer banking and credit, corporate and
investment banking, insurance, securities brokerage, and asset management. Major
brand names under Citigroup's trademark red umbrella include Citibank,
CitiFinancial, Primerica, Smith Barney, Banamex, and Travelers Life and Annuity.
Additional information may be found at: www.citigroup.com.
Webcast Scheduled
Sears will webcast an analyst and investor conference call today at 5:00 p.m.
EDT/4:00 p.m. CDT. The conference call will be webcast live over the Internet at
http://www.Sears.com/investors. From the Investor Relations page, select "Events
and Webcasts." The webcast will be archived and available on the company's
website at http://www.sears.com/investors, also under "Events and Webcasts."
Software necessary to listen to the webcast, Windows Media or Real Player, can
be downloaded from the webcast site. Downloading the software may take up to 22
minutes with a 56K modem.
Forward-Looking Statements
This press release and this morning's webcast contain forward-looking statements
about Sears' expectations regarding the sale of its Credit and Financial
Products business and its alliance with Citigroup, including statements
concerning expected benefits to Sears and the timing of closing of the
transaction. Statements preceded by, followed by or that otherwise include the
words "believes," "expects," "anticipates," "intends," "project," "estimates,"
"plans," and similar expressions or future or conditional verbs such as "will,"
"should," "would," "may" and "could" are generally forward-looking in nature
and not historical facts. These forward-looking statements are based on
assumptions about the future that are subject to risks and uncertainties, and
actual results may differ materially from the results projected in the forward
looking statements. Risks and uncertainties include the possibility that the
transaction does not close, that the companies may be required to modify aspects
of the transaction in order to achieve regulatory approval or other factors
outside the control of Sears and Citigroup. Further risks and uncertainties that
may cause actual results to differ materially include Citigroup's ability to
integrate and operate the Credit and Financial Products business successfully
and the ability of Sears to successfully integrate its retail businesses with a
third-party credit card program, which involves significant training and the
integration of complex systems and processes; the manner in which Citigroup
operates the Credit and Financial business, which may be different than the
manner that such business was operated by Sears and the impact of any such
differences on Sears' Retail business; conditions in retail and credit; changes
in consumer confidence and spending; consumer debt levels and the level of
consumer bankruptcies; the success of the Full-line store strategy and other
strategies; the possibility that Sears will identify new business and strategic
options for one or more of its business segments, potentially including
selective acquisitions, dispositions, restructurings, joint ventures and
partnerships; Sears' ability to integrate and operate Lands' End successfully;
the outcome of pending legal proceedings; anticipated cash flow; social and
political conditions such as war, political unrest and terrorism or natural
disasters; the possibility of negative investment returns in Sears' pension
plan; changes in interest rates; the volatility in financial markets; the
possibility of interruptions in systematically accessing the public debt
markets; changes in Sears' debt ratings; and general economic conditions and
normal business uncertainty. In addition, Sears typically earns a
disproportionate share of its operating income in the fourth quarter due to
seasonal buying patterns, which are difficult to forecast with certainty. The
company intends these forward-looking statements to speak only as of the time
of this release and does not undertake to update or revise them as more
information becomes available.
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This information is provided by RNS
The company news service from the London Stock Exchange
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