No Big Surprise: Kmart and Sears to Merge

Nov 17, 2004
George Anderson

By George Anderson

It’s not as though the announced merger agreement between Kmart Holding Corporation (Edward Lampert) and Sears, Roebuck and Co. (Edward Lampert) is going to come as any great shock to anyone. Still, when two retailers with a combined $55 billion in sales and nearly 3,500 stores reach a deal, it’s big news.

The combined company, Sears Holdings Corporation, will have Edward Lampert as its chairman. Alan Lacy, current chairman and chief executive officer of Sears, becomes the vice chairman and chief executive officer of the new company. Kmart’s recently hired chief executive, Aylwin Lewis, will become president of Sears Holdings and chief executive of Sears Retail.

In a released statement, Mr. Lampert said, “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. 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.”

The companies expect to save $500 million over three years due to synergies realized through the combined organization. The merger deal is expected to close by March 2005 pending shareholder approval.

Moderator’s Comment: What is your reaction to the announced merger between Kmart and Sears? What do you expect from
the combined company?

We know we’re being cynical, but our first thought was that there still is a lot more real estate to be sold.
George Anderson – Moderator

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