Sears' Spinoff Of Allstate Cheered
NEW YORK - Sears, Roebuck and Co. Chairman Edward Brennan has orchestrated a dramatic finish to one of the great comeback stories of the decade by announcing a $9 billion spinoff of the Allstate Corp. insurance subsidiary as his last major initiative.
The news spotlighted Sears' rapid recovery from sluggish sales, red ink and the controversial closing of its venerable catalog division. Analysts said the spinoff, set for next year, would strengthen Sears and Allstate. Investors reacted by pushing the price of Sears stock up $2.625 to $51.50.
Wall Street was equally enthusiastic about Brennan's recommendation that Arthur Martinez, a hero to company employees and investors for his success at building clothing sales, leave his leadership of the Sears Merchandise Group to become Sears' chairman and CEO upon the 60-year-old Brennan's retirement when the Allstate deal is complete.
Sears said it planned to sell its 80.1 percent share in Allstate, the huge insurer it created in 1931, to Sears stockholders next year. Investors have been suggesting for years that the two companies split in order not to dilute the stock price with Allstate's insurance crises.
Analysts said the Brennan-Martinez success in revitalizing Sears sales made it possible for the company to focus completely on its merchandising business.
"The retailer can now stand completely on its own feet, and doesn't need the profits from Allstate," said Joseph Ronning, an
analyst with Brown Brothers Harriman Inc.
By the end of this year it will have enlarged and modernized 250 of its 800 retail stores in a $4 billion facelift. It reported a record $2.4 billion profit in 1993 on total revenue of $50.8 billion.
"Sears and Allstate are ready, and the economic environment is right, for these successful American franchises to operate as independent companies," Brennan said. "Each company has strong management, very good operating performance and financial strength."
Copyright (c) 1994 Seattle Times Company, All Rights Reserved.