11/21/2004

K-Mart and Sears Merger

On the 17th of November, Sears Roebuck was acquired in a friendly merger with K-Mart Holdings Co.. The new entity will be called Sears Holdings. The merger worth an estimated 10.9 billion dollars was accomplished in a stock swap Sears stockholders are given the choice of receiving 50 dollars per share of Sears Roebuck common stock, or half a share Sears Holdings common stock per SRC common stock. K-Mart were to receive a share of SHC per K-mart share. K-Mart shares closed at 101&1/4 after the merger was announced.

The most surprising part of the merger is that K-Mart is actually the new parent company, considering that this company has just emerged from bankruptcy this news is quite a favorable assessment of K-Mart's management and there ability to turn what was K-Mart fall apart into a new retail powerhouse.

This new merged company promises to be able to give the number 2 retailer in the US (Home Depot) a run for their money and giant Wal-Mart reason to squirm. With strong exclusive brand names like, Craftsman Tools, and Martha Stewart Living, Sears Holding will slip strongly into the position of 3rd largest retailer in the Untied States.

5 comments:

Maudi said...

Many think that this new merger will make currently weak companies strong again!! I feel this is a very bad idea, K-Mart buying out Sears is like the blind leading the blind. It is obvious the Sears was smoking on the Perverbial "Crack Pipe" when they allowed this accuisition to take place. It would be one thing if K-Mart were an up and coming company and needed the Sears name to help them excell, but lets face it we might as well put a blue light on top of all Sears stores and watch as they implod. I feel that this is and was poor judgment on the part of Sears and just hope that they weren't planning on staying in business very long.

Rufio said...

I really don't think that Sears has made a bad decsion here. Think about it, for years Sears has been a household name, but now with Wal-mart in town Sears has had to take a backseat. Sears has stood stagnant ever since Wal-mart came on the scene, and I believe that in order to come out of this stagnation this change needed to be made. The merger between Kmart and Sears could be just what Sears needs to jump back into the game and show that they are still around. I also think that the items that Sears carries will help to boost Kmart from its slump and stand as a department leader as it once did.

John West said...

The person that initiated this merger is a very bright individual and very much resembles Warren Buffett in that every year his return on investments are between 15 and 20 percentage points. Take a look at the past couple of Business Week magazine issues, there are some very interesting takes on this merger. I personally believe that it is a good idea.

Dr. Tufte said...

-1 for spelling mistakes in Pramahaphil's post and Maudi's comment.

There isn't a lot of evidence in the finance literature that acquiring firms are making good decisions in mergers. That doesn't bode well for K-Mart. The shareholders of firm's being acquired usually do quite well.

Personally, I agree with Maudi: it's the blind leading the blind.

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