Posted on: Friday, March 25, 2005

$12.3B Sears, Kmart deal gets final approval

By Dave Carpenter
Associated Press

HOFFMAN ESTATES, Ill. — Kmart bought Sears, Roebuck and Co. for $12.3 billion yesterday, combining two faded retail icons whose sales have been declining for years into the nation's third-biggest retailer with $55 billion in annual sales.

Shareholders signed off on the deal in separate meetings at Sears' suburban Chicago headquarters, which now becomes the base for a company that adopts the name Sears Holdings Corp. It trails only Wal-Mart Stores Inc. and Home Depot Inc. among U.S. retailers.

The votes capped off the stunning proposal unveiled four months earlier by Kmart Holding Corp. Chairman Edward Lampert, the billionaire hedge-fund manager who was the largest individual shareholder in each company.

Lampert, who helped Troy, Mich.-based Kmart turn a $1.1 billion profit last year with the aid of real-estate transactions, denied he has a big selloff in mind for Sears assets and said the new company "goes beyond being an investment."

"It's an opportunity to transform two companies that once were great — to transform them into a great company relative to the 21st century," he said after the meetings. Contending that he has been unfairly labeled as a selloff specialist, he also denied the company has put the Lands' End casual clothing chain on the market, as an industry publication reported earlier this month.

The merger also brings together some other powerful brands that have succeeded while their companies' retail results have sagged, among them Craftsman tools, Kenmore appliances and, from Kmart, Martha Stewart, Jaclyn Smith and Joe Boxer.

Employees have been concerned about widespread job cuts when the new company moves to close stores and convert hundreds of Kmart stores this year to the new Sears Essential convenience-oriented format.

But officials said that although some layoffs will be announced by the end of April from among the 5,000 people working at the two firms' headquarters, the vast majority of the 400,000 workers will keep their jobs as Sears Holdings focuses on improving retail operations.

Sixty-nine percent of Kmart shareholders voted to approve the deal in results announced at a sparsely attended session lasting five minutes.

About two hours later, CEO Alan Lacy disclosed that Sears shareholders also had voted 69 percent in favor of the deal — but he had to endure shouting and insults by retired and former Sears employees upset about the sale.