K-Mart Is Buying Sears

[musicradio77]

I saw the news last about the K-Mart/Sears merger. Here's the article taken from the Daily News website:

K-MART SHOPPING SPREE BAGS SEARS IN 11B DEAL
Biggest retail merger

By TOM VAN RIPER
DAILY NEWS WRITER

An American icon is about to become the home of the blue-light special.

In the biggest retail merger ever, K-Mart - bankrupt just last year - is buying Sears, the old-line department store chain that opened in 1925. The price tag: $11 billion.

For fans of the blue-light special, that means the K-Mart store next to Penn Station just might start offering clothing from Lands' End - bought by Sears two years ago.

For that matter, the Kings Plaza Sears in Brooklyn could be the closest place to satify a yen for Martha Stewart linen and Joe Boxer underwear, two big K-Mart staples.

The merger of two struggling retailers is designed to build a new series of launching pads for a strong lineup of products that have underperformed due to poor locations and price competition from big discount competitors Wal-Mart and Target.

Other notable brands include K-Mart's Jacklyn Smith and Thalia Sodi clothing lines, and Sears' Kenmore appliances and Die Hard batteries.

"Sears' problem is that it's cnot near where its customers are," said K-Mart chairman Eddie Lampert, insisting it needs to find new locations with mall construction slowing.

So expect the new company to cross-sell two store's products, while turning some Sears locations into K-Marts and vice versa.

"Look for a shift depending on what's best for the neighborhoods," said Deutsche Bank analyst Bill Dreher.

And while management did not say Martha Stewart merchandise will definitely expand to Sears, analysts said such a move makes sense.

"The Martha line hasn't sold enough in the past year to cover its [$47 million per year] guarantee," said analyst Dennis McAlpine, nothing it would be logical to put into more stores.

The merger is set to take effect in March 2005, pending the approval of shareholders and regulators. It would create the country's third-largest retailer, behind Wal-Mart and Target, with a combined $55 billion in annual sales at 3,450 stores.

Management wasn't speulating on the number of possible store closures and layoffs, though K-Mart chairman Lampert told analysts the deal would bring some headcoutn changes. There are five K-Mart and six Sears stores in the five boroughs - a hefty number for a single city.

Execs also said the merger will save about $300 million annually by streamlining areas like supply purchasing and marketing.

Stil, not everyone is singing the deal's praises.

"We do not believe that combining two failed retailers will make a viable challenge to Wal-Mart", Goldman Sachs retail analyst George Strachan, adding that the stores' real estate could make shares of the new company attractive.

Investors gave the inital news a big thumbs up, sending shares of both companies soaring yesterday. Sears rocketed $7.79 to $52.99, while K-Mart vaulted $7.78 to $109. Martha Stewart Living shares also surged, gaining $1.09 to $18.49.

Vornado's Roth cashing in on Sears real estate smarts

Steven Roth has a reputation as a savvy real estate buyer. K-Mart's agreement to buy Sears make him look like a smart-picker, too.

His Vornado Realty Trust took a 4.3% stake in Sears during the summer - which is now expected to pay off big-time for vornado shareholders.

"Steve Roth is a very disciplined buyer - he finds value rocks," said Vornado stockeholder Jimmy Kuhn of Newmark & Co. Real Estate.

The Sears stake could give Vornado a potential gain of more than $90 million, or 70 cents per share, said equity analyst Raymond Mathis of Standard & Poor's. That's big money - nearly as big as profits for the entire period of July through September.

Mathis expects Vornado to share the wealth by paying a special dividend - as it has done twice in the past year.

Vornado has prosperd by buying distressed retailers and developing their real estate. So analysts saw Vornado's purchase of Sears stock as a first step in seeking control of Sears' real estate.

The pending marriage of K-Mart and Sears has erased that hope - but there's a happy ending for Vornado shareholders anyway.

"Roth is walking away with a pile of cash," Mathis said.

[laceyinthesky]

I bet Rainman's drooling.

[Janice]

The polyester and rayon giants are merging. A nerd's dream come true.