CHICAGO -- Completing a return to its retailing roots, Sears, Roebuck & Co. said yesterday that it would give control of Allstate Corp. to Sears shareholders, the last remnant of its grand strategy to build a financial services empire on the shoulders of its huge retailing business.
By relinquishing control of its $9 billion stake in Allstate, the nation's second-largest insurer of homes and autos, after the State Farm Group, Sears will complete one of the largest corporate revampings in business history.
The divestment will be a fitting coda to the careers of the two top Sears executives who steered the company through years of expansion, crisis and restructuring.
Edward Brennan, 60, Sears' chairman and chief executive, and James Denny, 62, vice chairman, plan to retire when the Allstate deal is completed next year.
"It looks like he's done the whole job," said Robert Monks, a Sears shareholder who campaigned to split the chain stores from the financial service businesses in 1991. "Sears is home now."
Mr. Brennan said yesterday that it made sense for Arthur Martinez, 55, the former Saks Fifth Avenue executive who was brought in two years ago to halt Sears' slide, to run the company.
By the time Mr. Martinez takes over, Sears will be largely reduced to its historic role of a giant retailer.
Shedding Allstate would be the last rite for one of the boldest corporate strategies of the 1980s. The plan was to transform Sears from the pre-eminent retailer to America's middle class into what analysts termed a "socks and stocks" financial supermarket offering real estate, stock brokerage and financial services.
Sears purchased savings and loans, the Coldwell Banker real estate brokerage and the Dean Witter stock brokerage. It also introduced the Discover credit card.
But the plan failed when consumers showed little interest in managing their financial affairs amid the Craftsman tools and Kenmore washers of Sears stores. Worse still, the retail operations lost their ranking as the nation's No. 1 retail chain as both Wal-Mart Stores and Kmart overtook Sears in revenues and profits.
By the time Mr. Brennan took over in 1986, many people on Wall Street were calling for Sears to be broken up into separate companies that would be worth more individually than as part of a retailing and financial services giant.
Mr. Brennan initiated studies of the company by Goldman, Sachs & Co., its longtime investment bank, and took several minor steps to rein in its scope. But he was seen by some shareholders as imperious and too cautious.
Mr. Brennan, for his part, was in no hurry to sell highly profitable financial service businesses that had grown in revenue from $9.5 billion to $26 billion over the decade ended in 1991, despite their heavy debt load.
But shareholders believed that the value of the company -- and their investments -- would be greater if Sears' retailing business was walled off from the financial companies.
As Mr. Brennan resisted and problems mounted, he was often lumped with John Akers Jr., the former chairman of IBM, and Robert Stempel, the former General Motors chairman, and other chief executives who resisted change and were pushed out.
What was not visible to outsiders, Sears board members say, is that Mr. Brennan had been methodically weighing drastic changes for the company and had kept Sears directors informed of the problems and his plans for solving them and raising Sears' languishing stock price.
"It was group dynamics at its best," said C. B. Rogers Jr., a board member who is chairman and chief executive of Equifax, an Atlanta-based information services company.
In late 1992, the pace of change accelerated with the recruitment of Mr. Martinez. While Mr. Martinez overhauled the retailing operations, including overseeing such wrenching decisions as closing down the historic Sears catalog, Mr. Brennan was heavily pruning almost everything else as investors showed a willingness to pay handsomely for financial assets.
The Discover credit card operations, the Dean Witter stock brokerage subsidiary, the Coldwell Banker real estate group and Sears Mortgage Banking Group were shed.
In June 1993, Sears sold the public 19.9 percent of Allstate, which it began in 1931 when it began selling car insurance through its catalog and stores, for $2.12 billion in a stock offering. And on Monday the company even gave up ownership of the heavily indebted Sears Tower, the landmark skyscraper erected in Chicago in the early 1970s as its headquarters.
Sears also said yesterday that it would sell its Homart Development Co., a real estate development firm.
After Allstate and Homart are gone, Sears will consist of about 800 department stores, a credit company that accounts for most of its $20 billion of debt (down from a burdensome $50 billion before the company began to pare operations) and 1,200 specialty stores including Western Auto Supply Co. and the Homelife furniture stores.
Shareholders responded favorably to Sears' announcements by bidding up shares in active trading. The stock jumped as much as $3.50 a share, to $52.375, in early trading after the company's announcement and closed at $51.625, up $2.75 a share.
I= Allstate shares closed at $24.125 a share, down 75 cents.