TORONTO -- Struggling U.S. retailer Sears Holdings Corp. will raise as much as US$380 million by selling the majority of its stake in Sears Canada ahead of the busy holiday season.

After shopping Sears Canada around to prospective buyers and failing to find sufficient interest, the Chicago-area retailer is finding some breathing room using an alternative means of scaling back its stake in the company.

The announcement follows the departure last week of Sears Canada chief executive Douglas Campbell, who said he will leave the company by the end of the year and return to the United States for personal reasons.

All of the turmoil raises questions about the future of the Canadian operations which have struggled in recent years under Edward Lampert, the parent company's chairman and CEO. The billionaire investor has been one of the few constants in Sears Canada's recent history, having overseen a dramatic tightening of expenses and massive employee layoffs.

Lampert retains stakes in Sears Canada through the holding company, his own personal investment and through ESL Investments Inc., a private company that he controls.

Over the past year, they have received most of the profits made from gutting Sears Canada's operations through the sale of leases and properties across the country.

Nearly a year ago, Sears Canada made a special payment to shareholders -- primarily the U.S. investors -- of nearly half a billion dollars that was mostly from selling certain assets.

Sears Holdings made about $230 million from that transaction, and some of the money has gone back into its U.S. operations which have faced nine consecutive quarters of losses. The latest transaction will help remove the money-losing Canadian business from Sears Holdings financial results.

However, Sears Canada still faces the same competitive challenges as it deals with aging stores and only minor renovations that have made it look outdated when compared with newcomers like Target.

Matt McGinley, a managing director from International Strategy & Investment Group in New York, said the story at Sears in the U.S. and Canada is the same.

"They both have pretty significant consumer relevance issues that have developed over the course of decades," he said.

Under Campbell, Sears Canada dramatically reduced its workforce and also sold off leases to several department stores, including its prominent location at Toronto's Eaton Centre, a popular tourist destination

"The decline has certainly accelerated as Sears ... sold most of their best locations," said McGinley.

"When you sell the crown jewels you're left with assets that are certainly a lot less valuable."

The deal announced Thursday will see Sears Holdings sell up to 40 million shares of Sears Canada through a rights offering to its shareholders that will allow them to buy a portion of the shares offered based on their holdings. The subscription price for the offering was set at C$10.60 per Sears Canada share, a slight discount to its market price.

Sears Holdings plans to hold on to about a 12 per cent stake or 12 million shares in Sears Canada, valued at about US$113 million.

The company said Lampert plans to fully exercise his subscription rights. ESL Investments Inc., of which Lampert is also chairman and CEO, will do the same. Sears Holdings expects to receive at least $168 million from Lampert and ESL by mid-to-late October.

Fairholme Capital Management -- which controls about 24 per cent of Sears Holdings stock -- also indicated some its clients will take part in the offering.

Sears Holdings currently owns about 51 per cent of Sears Canada's stock, while ESL is the Toronto-based company's second-largest shareholder with about 27.6 per cent. ESL is also the largest shareholder of the U.S. parent company.

In the U.S., Sears is undergoing its own turbulent attempt at recovering its business, and recently announced that it had secured a short-term loan of $400 million from entities allied with Lampert's ESL Investments.

Credit ratings agency Fitch Ratings called the loan a short-term fix for a "much larger need" of cash and downgraded Sears' credit rating deeper into junk status.

With files from The Associated Press