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Kmart-Sears Merger to Create Third Largest U.S. Retailer

In a surprise $11 billion deal, Kmart will acquire Sears, Roebuck & Co., creating Sears Holdings Corp. The new company is expected to earn $55 billion in annual revenues and operate 3,500 stores, making it the third largest retailer in the United States, behind Wal-Mart and Home Depot, the Associated Press reported.

Kmart and Sears stores will continue to operate under their current names, with some Kmart stores converting to Sears. Sears Holdings Corp. plans to establish headquarters in northwestern Chicago, the current home of Sears, and will maintain a “significant presence” in Troy, Mich., where Kmart is now based.

Both companies date back more than 100 years, but have struggled since the emergence of discount retailers Target and Wal-Mart.

After seeking bankruptcy protection in 2002, Kmart shed extra stores and employees. The chain has posted profits for four consecutive quarters, and the merger caps a steady comeback.

As for Sears, in an attempt to revive slumping sales, the retailer last year created Sears Grand stores, which offered groceries and convenience items in off-mall locations.

Kmart Chairman and Sears shareholder Edward Lampert has been credited with engineering the deal, according to CNN.

“The idea is to make the stores more competitive while staying focused on the customer,” said Lampert. After the deal was announced Wednesday, stocks surged for both retailers, reported the AP.

The stores will attempt to marry Kmart’s reputation for low prices and custom brands with Sears’ home appliances and tools departments. Kmart currently carries the popular Martha Stewart and Jaclyn Smith brands, and Sears is home to Craftsman Tools and the Land’s End chain.

“Sears has had a very different problem from Kmart,” said Sears Chairman Alan Lacy. “Our service and products are as good as our competitors but they’re not where are customers are. This now gives us the opportunity to grow off-mall locations closer to the customer. It’s all about growth.”

The merger is expected to be finalized by the end of March, and will await approval by Kmart and Sears shareholders and regulatory agencies.

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