HOFFMAN ESTATES, Ill. (Nov. 17, 2004) — Kmart Holding Corp. and Sears, Roebuck and Co. have agreed to combine their Sears and Kmart retail operations into a new company in a deal valued at about $11 billion.&Copy;
The combined firm—Sears Holdings Corp.—will be the nation's third largest retailer, behind industry leaders Wal-Mart Stores Inc. and Home Depot Corp., with about $55 billion in annual revenues and nearly 3,500 stores. The company will have its headquarters in Hoffman Estates, where Sears is based, while Kmart still will have a presence in Troy, Mich., where its headquarters is located.
The retailers—both of which have faced stiff competition—have made “significant strides” in transforming their operations, and this deal will accelerate the process, the companies said. Sears and Kmart pointed to areas ripe for efficiency, such as procurement, marketing, information technology and supply chain management. The companies expect to generate about $500 million of annualized cost and revenue synergies from the deal.
The companies also expect savings from “cross-selling” opportunities between each retailer's proprietary brands and by converting a “substantial” number of off-mall Kmart stores to the Sears nameplate. Earlier this year Sears bought 50 stores from Kmart, which filed for bankruptcy protection in 2002 and emerged from bankruptcy in May 2003.
“The combination of Kmart and Sears is extremely compelling for our customers, associates and shareholders as it will create a powerful leader in the retail industry, with greatly expanded points of distribution, leading proprietary home and apparel brands and significant opportunities for improved scale and operating efficiencies,” said Edward Lampert, chairman of Kmart. “The merger will enable us to manage the businesses of Sears and Kmart to produce a higher return than either company could achieve on its own.
With the merger, which should close by March pending various approvals and conditions, Mr. Lampert will be the chairman of Sears Holdings. Alan Lacy, current chairman and CEO of Sears, and Aylwin Lewis, president and CEO of Kmart, will join Mr. Lampert in an Office of the Chairman. Mr. Lacy will be vice chairman and CEO of Sears Holdings. Mr. Lewis will be president of Sears Holdings and CEO of Kmart and Sears Retail.