WASHINGTON (AFP) - US retailer Kmart, which emerged from bankruptcy protection only 18 months ago, and Sears, Roebuck and Co. announced plans to merge into a new retail giant by March 2005, in a deal worth some 11 billion dollars.
With almost 3,500 retail stores, the new company, to be called Sears Holding Corporation, will have 55 billion dollars in sales annualy and will be headed by Kmart chairman Edward S. Lampert.
"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," Lampert said Wednesday.
"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 added.
Under the terms of the agreement, which was unanimously approved by both companies` boards of directors, Kmart shareholders are to receive one share of new Sears Holdings common stock for each Kmart share.
Sears, Roebuck shareholders are to have a choice between 50 dollars in cash or 0.5 shares of Sears Holdings (valued at 50.61 dollars, based on Tuesday`s closing price of Kmart shares) for each Sears, Roebuck share.
The merger of the two compaies was expected to generated cost savings and higher revenues of at least 500 million dollars as the combined group benefited from greater efficiency in procurement, marketing, information technology and supply chain management.
Kmart emerged from Chapter 11 bankruptcy protection in May 2003 and appointed Lampert, a hedge fund manager who held Kmart bonds.
After the reorganisation, Lampert`s fund was left with over 50 percent of Kmart`s shares and control four seats on the nine-member board of directors.
He is also a major shareholder in Sears as well other big US retailers such as Office Depot and Payless Shoe Stores.
Sears and Kmart already did business with each other when at the end of June Kmart sold 54 stores to Sears, Roebuck and Co. for 621 million dollars in order to shore up its balance sheet.
The deal marks the a major shake-up in the battered US retail industry and the end of an era at Sears, whose history goes back to 1886. In its early days the company supplied farmers in some of the wilder parts of the western United States with everything from fishing tackle to jewellery by mail order.

11/17/2004 - 14:16 GMT - AFP