Shareholders OK Sears Takeover

Kmart, to be renamed Sears Holdings, will control a combined 3,800 stores.
By Nat Worden ,

Shareholders approved

Kmart's

(KMRT)

proposed $11 billion acquisition of

Sears

(S) - Get Report

Thursday, clearing the way for a merger that will create Sears Holdings, the nation's third-largest retailer behind

Wal-Mart

(WMT) - Get Report

and

Home Depot

(HD) - Get Report

.

The approval came in votes held at successive meetings at Sears headquarters outside Chicago, which will be home for the new company. While 99% of Kmart shareholders approved the deal, just 69% of Sears holders backed it. Barring any unforeseen complications, the deal is set to create a merged retailer with about $55 billion in revenue and 3,800 stores.

First announced last November, the deal was orchestrated by Ed Lampert, manager of the ESL Investments hedge fund. Lampert, who will serve as chairman of the new company, brought Kmart out of bankruptcy two years ago and has held a stake in Sears since 2002.

The cost-cutting measures and asset sales instituted by Lampert at Kmart have led to a string of profitable quarters for the retailer, which was previously reeling under the competitive threat from Wal-Mart and Target. Now, with a sizeble cash pile, its shares have soared on speculation that Lampert plans to make investments elsewhere and build a holding company like Warren Buffett's

Berkshire Hathaway

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.

Shares of Sears also have gained on the news, despite its dismal performance of late. Investors have speculated the company has a rich portfolio of undervalued real estate, and Lampert's recipe for increasing profitability will prove effective there as well.

Shares of Kmart were recently up $3.41, or 2.7%, to $128.24, while shares of Sears were down $6.68, or 11.8%, to $50.12. Sears shares fell because of the expiration of a right to receive Kmart shares in takeover; now, Sears shares represent only the right to receive $50 in cash.

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