Discount retailer Kmart Corp. announced Wednesday morning it will buy department store operator Sears, Roebuck & Co.. The deal is to cost $11.5bn and will lead to the creation of the third-largest U.S. retailer, after Wal-Mart and Home Depot, and replacing Target at number three.
The new company, which is to be called Sears Holdings and be based near Chicago, will have $55 billion in annual revenue and nearly 3,500 retail stores. Edward Lampert, the chairman of Kmart, will become the chairman of the new company, while Alan Lacy, current chairman and chief executive of Sears will be the new chief executive. Sears CEO Alan Lacy, speaking about the deal, promised up to $500 million a year in savings within three years from improved efficient, greater purchasing power and possible store closures. The stores will retain their current names.
The purchase will allow the two stores to sell each other's brands, including Craftsman Tools, Kenmore, and Lands' End from Sears, and Martha Stewart and Joe Boxer brands from Kmart. The move is considered a boon for Sears, which until recently has confined itself to malls, and can now sell its products in the many Kmart locations.
Shares of both companies soared after the announcement, Sears was up 22 percent on Wednesday, whilst Kmart gained 15 percent. 
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Kmart to buy Sears for US$11 billion