Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, November 11, 1994 TAG: 9411110082
SECTION: BUSINESS PAGE: A-11 EDITION: METRO
SOURCE: Associated Press
DATELINE: CHICAGO LENGTH: Long
``The corporation has kind of reverted to what we were originally, and that's a very, very strong retail competitor,'' said Edward A. Brennan, Sears chairman and chief executive. ``This will give the focused retail investor a chance to invest in retail stock, the focused insurance investor a chance to invest in insurance stock.''
Brennan, 60, also announced plans to retire after the $8.7billion spinoff, expected to be completed in mid-1995.
He recommended that Sears' board of directors elect Arthur C. Martinez, 55, as his successor. Martinez, chairman and chief executive of Sears Merchandise Group, is widely credited with turning around the retailer's declining fortunes by cutting unprofitable operations such as its catalog division and, in just two years, changing Sears' staid image with consumers.
The Allstate announcement marked the end of Sears' attempt to become a financial supermarket as well as a general merchandise retailer.
The spinoff is not likely to affect any specific Allstate operation, including its regional office in Roanoke County, where the company employs 750, said a spokeswoman at Sears headquarters in Chicago.
She said the change in stock ownership would not directly affect how the company operates.
Jim Plotts, regional vice president in the insurance company's Roanoke office, was out of town Thursday and could not be reached for comment.
Sears' financial companies, which also included Dean Witter Reynolds and Coldwell Banker, did well. But the company's flagship retailing business foundered through much of the 1980s, not recovering until Martinez was brought in to revive it. Sears was forced to focus its resources on the merchandise group and divest itself of its other holdings.
Industry analyst Joseph Ronning of Brown Brothers Harriman Inc. in New York called the moves highly positive.
``It is a recognition of the dramatic improvements that have taken place in the Merchandise Group in the past two years under Arthur Martinez,'' Ronning said. ``Martinez has shown that the Merchandise Group can stand alone.''
He noted that when Sears' merchandising encountered problems in the 1970s and '80s, Allstate helped buoy the parent company's stock price. But the costs to Allstate of recent disasters - notably Hurricane Andrew and the California earthquake - have scared some investors away from Sears, he said.
``Certainly, Hurricane Andrew and the earthquake have been a drain, but that's the insurance business, and once in a while you're going to get a big hit like that,'' Brennan said. ``But the fundamentals of Allstate, the operating earnings, [minus] the earthquake and the hurricane, are just excellent.''
Wall Street welcomed the news, bidding up the retailer's stock by $2.75 a share to close at $51.621/2. Separately traded stock in Northbrook, Ill.-based Allstate fell 75 cents a share to $24.121/2.
The spinoff announcement comes just six months after the company's board and shareholders rejected an investor's call for Sears to rid itself of Allstate, founded by Sears in 1931.
Sears sold 20 percent of Allstate to the public in 1993 and also has divested itself of all its real estate and financial services divisions.
Sears officials said the distribution of the 360million Allstate shares would be one of the largest spinoffs in U.S. business history. Sears has assets of $90.8billion. By comparison, AT&T spun off 22 companies worth $80billion with assets of $153billion in 1984.
Under the proposal, Sears common shareholders would receive 0.95 share of Allstate stock for each Sears share.
In addition to shareholder approval, which is expected, Sears officials said the spinoff also is contingent on approval of its tax-free nature, market conditions and regulatory approval.
Sears recently has been positioning itself for the move. In 1993, it raised $4.2billion in cash and eliminated $19billion in debt. It also announced this week that it was giving up Sears Tower, the world's tallest building, eliminating another $850million in debt.
The company also is exploring divestiture of Homart Development Co., a developer of regional shopping malls and community centers.
After the Allstate spinoff, Sears will have about 800 U.S. retail stores and credit card operations; about 1,200 specialty stores, including Western Auto Supply Co.; and various free-standing stores for furniture, paint, hardware and appliance sales.
The retailer currently is remodeling stores to increase floor space, an important move in trying to increase sales and improve its bottom line.
Thomas Tashjian, an analyst for the First Manhattan Co. in New York, praised Brennan's timing of the move.
``Brennan has agreed with what the shareholders wanted several years ago, but by doing things slowly and deliberately, he has made sure that both companies can now stand on their own,'' Tashjian said.
Staff writer Mag Poff contributed to this story.
ALLSTATE IN ROANOKE
Allstate Insurance Corp. operates a regional operations center on Virginia 419 in Roanoke County. The center processes new business and endorsement of policies for property and casualty insurance.
The center employs about 750 workers.
Allstate also has a small-claims office at the Fralin & Waldron building on 419. There are several independent sales offices scattered throughout the Roanoke Valley.
by CNB