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Merger of Kmart and Sears Creates Third-Largest Retailer in the US

Strategic Insights

— 2 min read

The proposed merger between Kmart Holding Corporation and Sears, Roebuck and Co. is expected to create a retail giant with $55 billion in annual revenues, making it the third-largest retailer in the United States. The combined company, to be named Sears Holdings Corporation, will operate under the Sears and Kmart brand names and have a total of nearly 3,500 retail stores across the US and Canada.

Key Takeaways:

  • The merged company will have a combined store base of nearly 3,500 stores, making it the third-largest retailer in the US.
  • The merger is expected to generate $500 million in annualized cost and revenue synergies to be fully realized by the end of the third year after closing.
  • The combined company will have a broader retail presence and improved scale through a national footprint of nearly 3,500 retail stores.
  • The merger is expected to be tax-free to Kmart shareholders and tax-free to Sears, Roebuck shareholders to the extent they receive stock.
  • The new company will have a powerful home appliance franchise as well as strong positions in tools, lawn and garden, home electronics, and automotive repair and maintenance.
  • Key proprietary brands including Kenmore, Craftsman, and DieHard will be retained, as well as a broad apparel offering featuring Lands' End, Jaclyn Smith, and Joe Boxer.
  • The merger is subject to approval by Kmart and Sears shareholders, regulatory approvals, and customary closing conditions.
  • The transaction is expected to close by the end of March 2005.
  • The combined company will have a ten-member board of directors, including seven members of the current Kmart board and three members of the current Sears, Roebuck board.
  • Edward S. Lampert, chairman of Kmart, will be the chairman of Sears Holdings, with Alan J. Lacy and Aylwin B. Lewis serving as vice chairman and CEO, and president and CEO, respectively.

Statistics:

  • $55 billion: The combined annual revenues of the merged company.
  • $500 million: The estimated annualized cost and revenue synergies expected to be generated by the merger.
  • Nearly 3,500: The total number of retail stores the merged company will operate across the US and Canada.
  • $41.1 billion: The 2003 revenues of Sears, Roebuck and Co.
  • $200 million: The estimated incremental gross margin from revenue synergies.
  • $300 million: The estimated annual cost savings from improved merchandising and non-merchandising purchasing scale as well as improved supply chain, administrative and other operational efficiencies.

Sources:

  • Kmart Holding Corporation. "Kmart and Sears Announce Merger Agreement." Press release, February 2005.
  • Sears, Roebuck and Co. "Sears and Kmart Announce Merger Agreement." Press release, February 2005.
  • Joint proxy statement/prospectus regarding the proposed transaction, filed with the SEC.
  • 2003 Annual Reports on Forms 10-K of Kmart and Sears, filed with the SEC.

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