(Reuters) - Sears Holdings Corp (SHLD) said it was looking to sell its 51 percent stake in Sears Canada Inc (SCC.TO) in a process that could result in all of the struggling Canadian department store operator being put up for sale.
Shares of Sears Holdings, controlled by hedge fund billionaire Eddie Lampert, were up 2 percent in premarket trading.
The company, which operates more than 2,300 stores in the United States and Canada, said on Wednesday it would hire an investment bank to help explore alternatives for its stake in the Canadian company.
Sears Canada, which has a market value of C$1.6 billion ($1.5 billion), said it would cooperate with its parent company "to achieve value for all shareholders".
The company has 176 corporate stores, 234 Hometown stores, over 1,400 catalogue and online merchandise pick-up locations, 97 Sears Travel offices and a repair and service network.
Sears Canada's sales have fallen for six straight years and it has lost significant market share in the intensely competitive Canadian retail market, where Wal-Mart Stores Inc (WMT) and Target Corp (TGT) have been expanding.
Since November, the company has announced more than 3,000 job cuts, some of which would be done by outsourcing certain call center operations to IBM Corp (IBM.N).
In the past year, Sears has terminated leases on seven stores among other divestitures, including vacating its flagship store at Toronto Eaton Centre, to cut costs.
Chief Executive Douglas Campbell said last month that the company was not actively pursuing any asset sales, but would consider opportunities that would "substantially" add value.
Sears Holdings, the operator of Sears department stores and the Kmart discount chain, is itself trying to engineer a turnaround after suffering from declining sales since 2005, when Lampert merged the two U.S. chains in an $11 billion deal.
The company has closed about 300 U.S. stores since 2010, but still struggles to generate cash.
Sears Canada's shares closed at C$15.76 on Tuesday on the Toronto Stock Exchange. The stock has risen about 55 percent in the past year, while Sears Holdings' shares have fallen about 4.5 percent.
(Reporting by Ashutosh Pandey in Bangalore; Editing by Savio D'Souza)