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[Shockeye]

Kmart Shareholders Approve Acquisition of Sears in an $11 Billion Deal

By DAVE CARPENTER
The Associated Press

HOFFMAN ESTATES, Ill. Mar 24, 2005 — Kmart Holding Corp. shareholders approved the acquisition of Sears, Roebuck and Co. on Thursday in an $11 billion deal executives hope will create a retail powerhouse while helping to reverse years of lagging sales.

The Kmart shareholders meeting at Sears headquarters in suburban Chicago was perfunctory, lasting just five minutes. Sears shareholders were scheduled to vote on the deal later Thursday.

Kmart Chairman Edward Lampert unveiled the proposed pairing of longtime industry rivals four months ago. Barring a last-minute hitch, Sears' sprawling headquarters will now house a new retail titan named Sears Holdings Corp. with $55 billion in revenue, 3,800 stores and an uncertain future.

Sears shares fell $6.06, or nearly 11 pecent, to $50.74 in morning trading on the New York Stock Exchange, while Kmart shares rose $1.19 to $126.02 on the Nasdaq Stock Market.

The deal will create the nation's third-biggest retailer behind Wal-Mart Stores Inc. and Home Depot Inc. and bring together Sears' top brands Craftsman and Kenmore with Kmart's successful Martha Stewart and Joe Boxer product lines. It also furthers Sears' strategy of moving away from shopping malls to the more profitable off-mall sites that Kmart stores typically occupy.

But since each firm has struggled on its own, it remains to be seen whether the combined company can manage to keep up with thriving competitors.

Lampert, whose investment firm controls Kmart and is Sears' largest individual shareholder, has orchestrated a financial turnaround at Troy, Mich.-based Kmart since it emerged from bankruptcy in 2003. The discounter turned a $1.1 billion profit last year, although it was largely the result of selling off real estate as sales continued to decline.

He and Sears chairman and chief executive Alan Lacy, who will be CEO and vice chairman under Lampert at Sears Holdings, say the merger should save $500 million over the next three years. That means announcements of widespread store closings and staff cuts may be imminent.

After boosting profits at Kmart, Lampert faces a similar challenge at Sears, where sales have slipped lower for four consecutive years and the $1.9 billion acquisition of Lands' End three years ago hasn't worked out. He has already signaled a change in direction last month with the announcement that dozens of earlier-acquired Kmart stores would be converted to a new mid-sized store format called Sears Essentials.

Analysts are skeptical about prospects for a retail turnaround.

"We think Eddie has the Midas touch, and in the short term I expect him to cut costs out of the business and extract value from some of Sears' non-strategic assets," said retail analyst Kim Picciola of Chicago-based Morningstar Inc. "But over the long term, we just don't see this combined retailer effectively competing against the Wal-Marts and Targets of the world."

Retail consultant Howard Davidowitz expects Lampert to take the same approach at Sears to generate cash that he did at Kmart: sell assets, cut costs, reduce inventory and raise prices.

"He recognized Kmart was a cadaver and he monetized it," Davidowitz said.

"For the short term, it's very exciting. But for the long term, watch out," he said of the strategy, forecasting a "bleak outlook" for Sears unless the move away from malls is successful.

Independent retail analyst Richard Hastings thinks that by maintaining Sears' strength in appliances and adding Kmart's Martha Stewart tag, the new company can prosper.

"It's about profitability, it's not about sales," he said. "It may get smaller, but … it's going to be more profitable, more stable, with a better strategy. And it'll be more competitive with Wal-Mart and Target." 

[HaemishM]

Retail consultant Howard Davidowitz expects Lampert to take the same approach at Sears to generate cash that he did at Kmart: sell assets, cut costs, reduce inventory and raise prices.

HURRAH! More layoffs.

Fuckheads.

[Paelos]

Why don't they just sell out to Wal-mart and call it a day?

[Strazos]

Erm, is this different from the merger that occured about 9 months ago?

[SirBruce]

Ahh, K-Mart.  It just won't die, and yet it always collapses and restructures.  Every few years, someone is on one of the investment shows touting the stock, and I always tell them, "That dog won't hunt."

Bruce

[HaemishM]

This is one place I agree with you, Bruce. If they were really going to unfuck K-Mart, it would have happened years ago. Time has passed them by.

[Abagadro]

Ya, the stock is only up 1100% since it came out of reorganization in 2003 (350% in the last year). That is a real dog.

[SirBruce]

See, I knew someone was going to mention that. :)

As a short-term play, you can make tons of money with just about any stock.  But that's not investing, that's gambling.  You want to hold the stock for 20 years?  Buy Wal-Mart, not K-Mart.

Bruce

[Strazos]

Fuck Wal-Mart, bastards.

[Abagadro]

If you are going to buy and hold for 20 years, just get a no load index fund.

And Wal-Mart is reaching saturation level in the market, which is bad because they have relied on expansion to hide the fact that their same-store sales growth isn't very good.  Besides, they are evil bastards.

[Sky]

You're thinking too small.

Wal Mart is only getting started.  Nowhere NEAR saturation, indeed, just ramping up distribution methods to move on with the plan.

Trust me, if you buy into stock voodoo, Walmart is very solid for the foreseeable future, barring global war. Even then...they'd have the infrastructure to support the troops...on both sides...

[Murgos]

Trust me, if you buy into stock voodoo, Walmart is very solid for the foreseeable future, barring global war. Even then...they'd have the infrastructure to support the troops...on both sides...

M&M?

[HaemishM]

But that's not investing, that's gambling. 

Investing is 21st Century America's version of gambling. It's "socially acceptable" form of gambling that our entire economy is based on.

Yay for us.

[Strazos]

But that's not investing, that's gambling. 

Investing is 21st Century America's version of gambling. It's "socially acceptable" form of gambling that our entire economy is based on.

Yay for us.

Whatever, gimme Caesar's any time.

[Samwise]

Difference between Caesar's and the economy is that at Caesar's, the house always wins.  With the economy, you are the house, so on average, you always win.  A lot.

[HaemishM]

Unfortunately for us, if you cheat at Caesar's, you get your legs broke. While if you cheat at the stock market, you get to complain that your fucking ankle bracelet chafes and interferes with that "cheery young lady of 63" look.

[SirBruce]

As Jesus said, "Render unto Ceasar that which is Ceasar's."

Bruce

[Shockeye]

As Jesus said, "Render unto Ceasar that which is Ceasar's."

As Caesar said, "Pizza! Pizza!"

[Sky]

*groan*

Who ordered extra cheese?

[shiznitz]

See, I knew someone was going to mention that. :)

As a short-term play, you can make tons of money with just about any stock.  But that's not investing, that's gambling.  You want to hold the stock for 20 years?  Buy Wal-Mart, not K-Mart.

Bruce

2 years is not a short term play. K-Mart is a great brand that was horrendously mismanaged. You make the most money in stocks when companies go from crap to bad. The bottom of the sigma curve is the best place to be.

[SirBruce]

2 years is not a short term play.

That's the view of some investors, but not all.

Bruce