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Ian Ritter is national online editor for GlobeSt.com/RETAIL.

HOFFMAN ESTATES, IL-Two of the nation’s best-known retailers, Kmart and Sears, Roebuck & Co., plan to merge in an $11-billion deal. Company officials say the two would form Sears Holding Corp, the third-largest retailer US retailer behind Wal-Mart and the Home Depot, with about 3,500 stores and annual revenues of about $55 billion.

The deal would give Kmart stockholders one Sears Holding share. Sears stockholders would have the right to collect $50 in cash for each of their shares, or 0.5 shares of Sears Holding. The company would be based here, where Sears currently has its headquarters, and Kmart would keep a “significant presence” at its Troy, MI home base. The parties expect to close the deal by the end of March.

At the closing of the transaction, Edward S. Lampert, Kmart’s chairman, will become chairman of Sears Holding. Alan J. Lacy, Sears’ chairman and CEO, and Aylwin B. Lewis, Kmart’s president and CEO, will join him in an Office of the Chairman. Both companies will keep the names of their chains.

Kmart and Sears have already done deals this year. Last summer Sears agreed to acquire 50 Kmarts for $575.9 million. Last year Sears started rolling out its off-mall Sears Grand concept, which is a department store that also sells food. The retailer now operates four of those units and had planned to convert the Kmarts it acquired into similar stores. “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,” says Lacy, of the companies’ merger, in a statement.

Earlier this year Kmart also agreed to sell 18 stores for $271 million to the Home Depot. In early 2002, Kmart filed for bankruptcy protection, closed more than 550 stores and then emerged from Chapter 11 last year. The retailer’s stock has been trading at over $100 per share recently.

Sears has also undergone some recent changes. Last year the company sold its credit card business for $6 billion and its 226-unit National Tire & Battery chain for $260 million.

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