Sears Holdings Corp. ran into two big stumbling blocks on Tuesday that appear to have thwarted its attempt to privatize Sears Canada, its Canadian subsidiary.

The Ontario Court of Appeal ruled that Illinois-based Sears Holdings could not appeal a  September lower court decision that upheld an August ruling by the Ontario Securities Commission.

The OSC had ruled that the U.S. retailing giant failed to disclose information related to support agreements struck with Scotiabank, its investment banking division, Scotia Capital Inc., and Royal Bank.

The side agreements gave the banks, which own 7.6 million shares of Sears Canada, a better deal than was offered to other minority shareholders. The OSC ordered Sears Holdings to distribute another circular that excluded the banks from voting on the buyout offer.

Minority shareholders reject offer

Also on Tuesday, 61.5 per cent of Sears Canada's minority shareholders voted against the $18-per-share takeover offer from Sears Holdings.

Sears Holdings owns 54 per cent of Sears Canada but needed more than 50 per cent of its minority shareholders to accept the buyout offer.

Richard Rubin, managing partner for Hawkeye Capital Management, which is a Sears Canada minority shareholder, applauded the rejection.

The rejection "is about minority shareholders receiving fair value, what they deserve, and not letting some big party take advantage of smaller holders," he said.

Investors responded by sending shares of Sears Canada up by over five per cent. The stock gained $1.27 to finish at $24.52 on the TSX.

Sears Holdings said it will amend its offer to comply with the OSC ruling, but added that it expects its bid will expire on Nov. 27 without any other adjustments to its terms.

With files from the Canadian Press