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HOFFMAN ESTATES, IL-Sears Holdings Corp., the company formed by the merger of Sears and Kmart, is looking to shed the 82-store Orchard Supply chain of hardware and garden retail stores located throughout California, which it has owned since 1996. The retailing giant “intends to pursue alternatives for the separation of the company’s Orchard Supply Hardware business” it said Monday. The company has retained Citigroup Global Markets Inc. and Lehman Brothers Inc. as advisers regarding what to do with the chain, which is based in San Jose, CA.

Sears Holding might sell the business or might spin it off in an initial public stock offering, it says, with Sears Holding CEO and vice chairman Alan J. Lacy saying that the company is considering the moves because management is focusing its attention and capital on its core retailing business created by the merger of Sears and Kmart.

The Orchard Supply business model and growth strategy are sound, Lacy says, but the shedding of the hardware chain would provide Orchard with capital to grow its store base while at the same time providing value to Sears Holdings. If Sears Holdings ultimately decides to take the Orchard Supply chain public, it would mark a return to the public markets for the San Jose-based company, which was publicly traded before Sears acquired it in 1996.

The Orchard Supply chain traces its roots to 1931 in San Jose, where 30 farmers facing hard times in the Great Depression banded together and invested $30 apiece to form a buying cooperative and rented a warehouse that was the first Orchard location. Sears paid $309 million for Orchard Supply in 1996, when the hardware chain operated more than 60 stores. Sears Holdings Corp. is the nation’s third largest broadline retailer, with approximately $55 billion in annual revenues, and with approximately 3,800 full line and specialty retail stores in the US and Canada.

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