New York Times Editorial, 17 November 2004

[윤택]

November 17, 2004
Kmart Moves to Acquire Sears in $11 Billion Retailing Deal
By CHRISTINE HAUSER

The Kmart Holding Corporation moved today to acquire Sears, Roebuck & Company in a deal valued at $11 billion that would bring together two household names to create the nation's third-largest retailer.

The deal, which was unexpected, was greeted warmly on Wall Street, where shares of both companies surged. By merging, Kmart and Sears, whose sales have been flagging, are aiming to regain the competitive edge that they lost over the last decade to such giant retailers as Wal-Mart, by far the nation's largest, as well as Home Depot, which will remain No. 2.

Kmart and Sears said the combined company, known as the Sears Holdings Corporation, would weave together their networks of 3,450 stores and have annual revenues of about $55 billion.

"The combined business will have a broader retail presence and improved scale," the companies said in a statement said. They said the merger would provide improved operational efficiency in such areas as buying, marketing, information technology and supply management, and they projected annual cost savings of in excess of $300 million.

On Wall Street, Kmart's stock climbed $16.70, or 16.5 percent, to $117.92 in Nasdaq trading this afternoon. Shares of Sears jumped $10.44, or 23.1 percent, to $55.64 on the New York Stock Exchange.

The Kmart and Sears stores will continue to operate under their current names, the companies said.

The deal highlights the rebound of Kmart, which emerged from bankruptcy reorganization in May 2003. In August, Kmart posted its third profitable quarter in a row, even as sales declined 15 percent. Bolstered by its real estate holdings - some 1,400 stores around the country - it was in the odd position of losing ground in consumer sales while generating significant profits as a company.

Sears has been trying to turn around its performance for several years but has had limited success. As it has redesigned stores and added to its merchandise in hopes of increasing sales, competitors like Wal-Mart, Home Depot and Lowe's have snatched away its customers.

The merger is expected to close by the end of March 2005, and is subject to approval by shareholders. The combined company will be based at the Sears headquarters in the Chicago suburbs, but Kmart and Sears said it would maintain a "significant presence" in Troy, Mich., where Kmart is based.

Under the terms of the deal, Kmart shareholders will receive one share of new Sears Holdings common stock for each of their shares.

Sears, Roebuck shareholders will receive either $50 in cash or half a share of Sears Holdings for each of their shares. "Shareholder elections will be prorated to ensure that in the aggregate 55 percent of Sears, Roebuck shares will be converted into Sears Holdings shares and 45 percent of Sears, Roebuck shares will be converted into cash," the companies said in their statement.

The chairman of Kmart, Edward S. Lampert, will be the chairman of Sears Holdings.

"This is something we have been working on very diligently," Mr. Lampert said at a news conference in New York. "This is going to be an enormous undertaking."

Mr. Lampert, who is the founder of the investment company ESL Partners, said in the statement that the merger would create a "powerful leader" in the retail industry with expanded distribution points and better opportunities for efficiency.

"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," he said.

He said that a low cost structure was needed to compete with the two companies' biggest competitors.

The immediate focus of the two companies would be the coming holiday season, he added. Then they will "go forth from there," according to Aylwin B. Lewis, the president and chief executive of Kmart.

Mr. Lewis said that the agreement "will allow us to turbocharge" both companies to compete.

Alan J. Lacy, currently the chairman and chief executive of Sears, will be vice president and chief executive of the new company. There will be a 10-member Sears Holdings board that includes seven members of the current Kmart board and three from the Sears, Roebuck board.

"The combination will greatly strengthen both the Sears and Kmart franchises by accelerating the Sears off-mall growth strategy and enhancing the brand portfolio of both companies,'' Mr. Lacy said in the statement.

In a profile this month of Mr. Lampert, Business Week magazine said Mr. Lampert "has built his success on some of the least sexy investments around," searching for companies that are seriously undervalued or reeling from bad management or strategies.

Comparing him to the investor Warren E. Buffett and the textile maker company that was Mr. Buffett's "launch pad", Business Week said that ESL's 53 percent stake in Kmart "might do the same" for Mr. Lampert. ESL also has a 14.6 percent stake in Sears, it said.

The share price of Sears, Roebuck soared 23 percent earlier this month after Vornado Realty Trust, the large real estate investor, said that it had acquired a 4.3 percent stake in the retailer.