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JPMorgan to buy Sears credit & financial services business

03 Sep '05

4 min read

Multi-channel retailer Sears Canada Inc announced it has entered into an agreement to sell its Credit and Financial Services business to JPMorgan Chase & Co for approximately $2.2 billion in cash proceeds net of securitized receivables and other related costs and taxes.

Sears anticipates that an after-tax gain of approximately $650 million will be recorded when the transaction closes. In addition, as part of the transaction, Sears and JPMorgan Chase will enter into a long-term marketing and servicing alliance with an initial term of 10 years during which Sears Canada expects to generate significant on-going cash flow from the alliance. The transaction has been approved by both companies and is expected to close by year-end 2005, subject to regulatory approvals and closing conditions.

The Strategic Alliance:
Under the long-term marketing and servicing alliance, JPMorgan Chase will provide credit and customer service benefits to Sears Card and Sears MasterCard holders in Canada. As part of the alliance, Sears Canada expects to receive more than $100 million in annual performance payments from JPMorgan Chase based on items such as credit sales, new account generation and sales of additional financial products. In addition, JPMorgan Chase will provide deferred financing for Sears customers at historical levels.

Sears Credit and Financial Services business includes 10 million total accounts, and $2.5 billion of receivables. This portfolio representsthe third largest in the country, and includes the largest in-house private label portfolio. Both the Sears Card and Sears MasterCard will continue to be offered through JPMorgan Chase and the transition will be transparent to Sears customers. JPMorgan Chase will manage operating centres in four Canadian locations including Toronto, Scarborough, Ottawa and Vancouver with approximately 1,000 employees.

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