New multi-channel powerhouse: Kmart to acquire Sears for $11 billion

Under a new company to be called Sears Holdings Corp., Kmart Corp. and Sears, Roebuck and Co. have agreed to merge in a stock-and-cash transaction currently valued at $11 billion to Sears stockholders, the two companies said today. The move would make the new company the 4th-largest web merchant, with combined e-commerce sales of $2.2 billion for Sears.com, LandsEnd.com and Kmart.com, according to Internet Retailer’s Top 300 Guide to online retailers.

“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,” said Kmart chairman Edward S. Lampert, who will take the title of chairman of Sears Holdings. The companies were not ready to comment on how the merger would impact their three retail web sites, Sears’ Sears.com and LandsEnd.com and Kmart’s Kmart.com, a spokesman says.

Lampert will be joined in an office of the chairman by Alan J. Lacy, the current chairman and CEO of Sears, who will become vice chairman and CEO of Sears Holdings, and by Aylwin B. Lewis, the current president and CEO of Kmart, who will become president of Sears Holdings and CEO of Kmart and Sears Retail.

Sears Holdings is expected to generate annual cost savings of $300 million and realize about $200 million in incremental gross margin by leveraging cross-selling opportunities, the companies said.

Lacy said the merger will strengthen Sears’ recent strategy of growing outside of major shopping malls.

Sears Holdings would account for a total of $2.2 billion e-commerce sales with Sears.com, LandsEnd.com and Kmart.com, putting it fifth in the 2004 edition of the Top 300 Guide behind Amazon, Dell, Office Depot and Hewlett-Packard.