EXHIBIT 99.1
KMART HOLDING CORPORATION AND SEARS, ROEBUCK AND CO. AGREE TO MERGE
COMBINATION CREATES 3RD LARGEST U.S. RETAILER WITH $55 BILLION IN
ANNUAL REVENUES; WILL HAVE BROADER RETAIL PRESENCE AND IMPROVED SCALE AND
OPERATIONAL EFFICIENCY
TROY, MI, AND HOFFMAN ESTATES, IL, NOVEMBER 17, 2004 -- Kmart Holding
Corporation (NASDAQ: KMRT) and Sears, Roebuck and Co. (NYSE: S) announced today
they have signed a definitive merger agreement that will combine Sears and Kmart
into a major new retail company named Sears Holdings Corporation. Sears Holdings
will be the nation's third largest retailer, with approximately $55 billion in
annual revenues, 2,350 full-line and off-mall stores, and 1,100 specialty retail
stores.
Both Sears, Roebuck and Kmart have made significant strides in
transforming their organizations, and the merger will further accelerate this
process for both companies. Sears Holdings will be headquartered in Hoffman
Estates, IL, and Kmart will continue to have a significant presence in Troy, MI.
The combined business will have a broader retail presence and improved scale
through a national footprint of nearly 3,500 retail stores. The combined company
will also benefit from improved operational efficiency in areas such as
procurement, marketing, information technology and supply chain management.
Under the terms of the agreement, which was unanimously approved by
both companies' boards of directors, Kmart shareholders will receive one share
of new Sears Holdings common stock for each Kmart share. Sears, Roebuck
shareholders will have the right to elect $50.00 in cash or 0.5 shares of Sears
Holdings (valued at $50.61 based on yesterday's closing price of Kmart shares)
for each Sears, Roebuck share. Shareholder elections will be prorated to ensure
that in the aggregate 55 percent of Sears, Roebuck shares will be converted into
Sears Holdings shares and 45 percent of Sears, Roebuck shares will be converted
into cash. The current value of the transaction to Sears, Roebuck shareholders
is approximately $11 billion. The transaction is expected to be tax-free to
Kmart shareholders and tax-free to Sears, Roebuck shareholders to the extent
they receive stock.
Edward S. Lampert, chairman of Kmart, will be the chairman of Sears
Holdings. He will be joined in an Office of the Chairman by Alan J. Lacy,
current chairman and chief executive officer of Sears, and Aylwin B. Lewis,
current president and chief executive officer of Kmart. Mr. Lacy will be vice
chairman and chief executive officer of Sears Holdings; Mr. Lewis will be
president of Sears Holdings and chief executive officer of Kmart and Sears
Retail. Glenn R. Richter, currently executive vice president and chief financial
officer of Sears, Roebuck, will be executive vice president and chief financial
officer of Sears Holdings. William C. Crowley, currently senior vice president -
finance of Kmart and a Kmart Board member will be executive vice president,
finance and integration of Sears Holdings.
Messrs. Lampert, Lacy, and Lewis will join a ten-member Sears Holdings
board of directors, which will include a total of seven members of the current
Kmart board and three members of the current Sears, Roebuck board. Sears
Holdings will act as the holding company for the Sears and Kmart businesses,
which will continue to operate separately under their respective brand names.
Mr. Lampert said, "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, with greatly expanded points of distribution,
leading proprietary home and apparel brands and significant opportunities for
improved scale and operating efficiencies. 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."
ESL Investments and its affiliates, which are controlled by Mr.
Lampert, have agreed to vote all Kmart and Sears, Roebuck shares they own in
favor of the merger and to elect stock in the transaction with respect to their
shares of Sears, Roebuck.
Mr. Lacy said, "The combination will greatly strengthen both the Sears
and Kmart franchises by accelerating the Sears off-mall growth strategy and
enhancing the brand portfolio of both companies. This will clearly be a win for
both companies' customers while significantly enhancing value for all
shareholders. We will have a total combined store base of nearly 3,500 stores
and the leading service organization in the industry capable of a major
expansion to serve the needs of existing Kmart and Sears customers."
Mr. Lewis said, "Kmart has made great progress over the past 18 months
to strengthen the organization in terms of profitability and product offerings.
We believe the combination of Kmart and Sears will create a true leader in the
retail industry -- both
as a key part of local communities and as a national presence. Together, we will
further enhance our capabilities to better serve customers by improving in-store
execution and ultimately transforming the customer's in-store experience."
Sears Holdings will feature a powerful home appliance franchise as well
as strong positions in tools, lawn and garden, home electronics, and automotive
repair and maintenance. Key proprietary brands include Kenmore, Craftsman, and
DieHard. The company will have a broad apparel offering, including such
well-known labels as Lands' End, Jaclyn Smith, and Joe Boxer as well as the
Apostrophe and Covington brands. It will also have Martha Stewart Everyday
products, which are now offered exclusively in the U.S. by Kmart and in Canada
by Sears Canada.
Kmart specialty retail stores will continue to carry their current
lineup in proprietary home and fashion lines including Thalia Sodi, Jaclyn
Smith, Joe Boxer, Martha Stewart Everyday, Route 66 and Sesame Street.
The combination of the two companies is conservatively estimated to
generate $500 million of annualized cost and revenue synergies to be fully
realized by the end of the third year after closing. The transaction, after
giving effect to estimated synergies, is expected to be significantly accretive
to earnings per share in the first year before one-time restructuring costs.
The companies expect to realize approximately $200 million in
incremental gross margin from revenue synergies by capitalizing on cross-selling
opportunities between Kmart and Sears' proprietary brands and by converting a
substantial number of off-mall Kmart stores to the Sears nameplate in addition
to the 50 Kmart stores Sears acquired earlier this year.
The company expects to achieve annual cost savings of over $300 million
principally through improved merchandising and non-merchandising purchasing
scale as well as improved supply chain, administrative and other operational
efficiencies. In addition, the combined company will complete a full store asset
review as part of a plan to monetize non-strategic real estate assets as
appropriate.
Mr. Crowley and Mr. Richter will jointly lead an integration team of
key operating executives from both companies to drive planning and execution of
the integration of the companies' operations.
The merger, which is expected to close by the end of March 2005, is
subject to approval by Kmart and Sears shareholders, regulatory approvals and
customary closing conditions. Lehman Brothers served as financial advisor to
Kmart, and Simpson Thacher & Bartlett LLP provided legal counsel to Kmart.
Morgan Stanley served as financial advisor to Sears, and Wachtell, Lipton, Rosen
& Katz provided legal counsel to Sears.
INVESTOR/MEDIA MEETING AND WEBCAST
Kmart and Sears will hold a meeting for the investment community and
the media today at 9:30 EST. Investors and the media are invited to attend the
meeting at The Westin New York, 270 West 43rd Street (at 8th Avenue) in the
Majestic ballroom on the 5th floor. Those unable to attend can dial in to a
conference call at (888) 802-8577 (domestic) or (973) 633-1010 (international)
or listen to a webcast at kmart.com or at http://www.sears.com/investors under
"Presentations & Audio Archives."
A telephone replay will be available beginning at approximately noon
today. The replay number is (877) 519-4471 (domestic) or (973) 341-3080
(international). Access code is 5416820. A replay of the event also will be
available at sears.com and kmart.com.
ABOUT KMART HOLDING CORPORATION
Kmart Holding Corporation and its subsidiaries (together, "Kmart") is a mass
merchandising company that offers customers quality products through a portfolio
of exclusive brands that include Thalia Sodi, Jaclyn Smith, Joe Boxer, Martha
Stewart Everyday, Route 66 and Sesame Street. For more information visit the
Company's website at www.kmart.com.
ABOUT SEARS, ROEBUCK AND CO.
Sears, Roebuck and Co. is a leading broadline retailer providing merchandise and
related services. With revenues in 2003 of $41.1 billion, the company offers its
wide range of home merchandise, apparel and automotive products and services
through more than 2,300 Sears-branded and affiliated stores in the U.S. and
Canada, which includes approximately 870 full-line and 1,100 specialty stores in
the U.S. Sears also offers a variety of merchandise and services through
sears.com, landsend.com, and specialty catalogs. Sears is the only retailer
where consumers can find each of the Kenmore,
Craftsman, DieHard and Lands' End brands together -- among the most trusted and
preferred brands in the U.S. The company is the largest provider of product
repair services with more than 14 million service calls made annually. For more
information, visit the Company's website at www.sears.com.
# # #
This press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements include, but
are not limited to, statements about the benefits of the business combination
transaction involving Kmart and Sears, including future financial and operating
results, the new company's plans, objectives, expectations and intentions and
other statements that are not historical facts. Such statements are based upon
the current beliefs and expectations of Kmart's and Sears's management and are
subject to significant risks and uncertainties. Actual results may differ from
those set forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ from
those set forth in the forward-looking statements: the ability to obtain
governmental approvals of the transaction on the proposed terms and schedule;
the failure of Kmart and Sears stockholders to approve the transaction; the risk
that the businesses will not be integrated successfully; the risk that the cost
savings and any other synergies from the transaction may not be fully realized
or may take longer to realize than expected; disruption from the transaction
making it more difficult to maintain relationships with customers, employees or
suppliers; competition and its effect on pricing, spending, third-party
relationships and revenues. Additional factors that could cause Kmart's and
Sears's results to differ materially from those described in the forward-looking
statements can be found in the 2003 Annual Reports on Forms 10-K of Kmart and
Sears filed with the SEC and available at the SEC's Internet site
(http://www.sec.gov).
STOCKHOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING
THE PROPOSED TRANSACTION WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN
IMPORTANT INFORMATION. Stockholders will be able to obtain a free copy of the
joint proxy statement/prospectus, as well as other filings containing
information about Kmart and Sears, without charge, at the SEC's Internet site
(http://www.sec.gov). Copies of the joint proxy statement/prospectus and the
filings with the SEC that will be incorporated by reference in the joint proxy
statement/prospectus can also be obtained, without charge, by directing a
request to Kmart Holding Corporation, 3100 West Big Beaver Road, Troy, Michigan,
48084 Attention: Office of the Secretary, or to Sears, Roebuck and Co., 3333
Beverly Road, Hoffman Estates, Il. Attention: Office of the Secretary.
The respective directors and executive officers of Kmart and Sears and other
persons may be deemed to be participants in the solicitation of proxies in
respect of the proposed transaction. Information regarding Kmart's directors and
executive officers is available
in its proxy statement filed with the SEC by Kmart on April 8, 2004, and
information regarding Sears' directors and executive officers is available in
its proxy statement filed with the SEC by Sears on April 30, 2004. Other
information regarding the participants in the proxy solicitation and a
description of their direct and indirect interests, by security holdings or
otherwise, will be contained the joint proxy statement/prospectus and other
relevant materials to be filed with the SEC when they become available.