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Kmart Buying Sears in $11 Billion Deal
The discounter Kmart Holding Corp. is acquiring one of the most venerable names in U.S. retailing, the department store operator Sears,Roebuck & Co., in a surprise $11 billion deal that will create the nation's third largest general merchandise retailer.The combined company under Wednesday's deal would be known as Sears Holdings Corp., but it was clearly orchestrated by Kmart chairman and Sears shareholder Edward Lampert who will lead a new board that will be dominated by Kmart directors. Shares of both companies surged on news of the deal. Kmart shares climbed $15.80, or 16 percent, to $117.02 on the Nasdaq Stock Market while Sears shares soared $9.70, or 21 percent, to $54.90 on the New York Stock Exchange.The deal marks a remarkable comeback for Kmart, a company once known for its "Blue Light Specials," that scaled back its operations after seeking bankruptcy protection in 2002. Sears' roots date to the late 1800s when it offered merchandise by mail order to farmers, opened its first retail store in 1925 and eventually became the nation's biggest department store operator.The new company is expected to have $55 billion in annual revenues and 3,500 outlets. That will mean it will trail only Wal-Mart Stores Inc. and Target Corp. among the biggest U.S. general merchandise retailers. The new company plans to operate the Kmart and Sears businesses under their current brand names.It will be headquartered in the northwestern Chicago suburb of Hoffman Estates, where Sears has its headquarters, but will maintain a "significant presence" in Troy, Mich., where Kmart is based.Under the agreement, which was unanimously approved by both companies' boards of directors, Kmart shareholders will receive one share of new Sears Holdings stock for each Kmart share. Sears, Roebuck shareholders can choose $50 in cash or half a share of Sears Holdings stock. That portion of the deal values Sears shares at $11 billion, a 10.6 percent premium over its value at Tuesday's close.Kmart chairman Lampert will be the chairman of Sears Holdings, while Sears CEO Alan Lacy will be vice chairman and CEO of the new company. The new 10-member Sears Holdings board will have seven members from Kmart and three from Sears. "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," Lampert said in a press release. Lampert, Kmart's majority shareholder, is also Sears' largest shareholder, holding a 15 percent stake in Sears through his ESL Investments Inc.The merger, expected to close by the end of March 2005, is subject to approval by Kmart and Sears shareholders, regulatory approvals and customary closing conditions.Kmart filed for Chapter 11 bankruptcy protection in early 2002, leading to the closing of about 600 stores, termination of 57,000 Kmart employees and cancellation of company stock. The retailer emerged from bankruptcy in May 2003 and in March posted its first profitable quarter in three years.Mired in a retail slump, Sears had long fallen out of favor on Wall Street after losing ground to competitors and enduring sluggish sales for years. The company last fall introduced its Sears Grand stores, which offer grocery and convenience items besides traditional Sears fare such as clothing, home appliances and tools. The concept had delivered promising results for the struggling retailer at its first three stores in metropolitan Salt Lake City, Las Vegas and Chicago, in the suburb of Gurnee.Kmart, in recent years, has been shedding many of its underperforming stores, a strategy that has helped the once-struggling discount retailer bounce back after it emerged from bankruptcy. Kmart recently agreed to sell 50 stores to Sears for $575 million as part of that strategy.Kmart's earnings have been improving. On Wednesday, Kmart posted net income in the third quarter ended Oct. 27 of $553 million, or $5.45 per share, compared with a loss of $23 million, or 26 cents per share, for the same period a year ago.Its stock price has risen nearly seven-fold to $101.22 on Tuesday from $15 a share when it emerged from bankruptcy.In recent weeks, it appeared that Sears could be shifting toward a similar real estate strategy after the disclosure that Vornado Realty Trust, a real estate investment trust, had purchased a 4.3 percent interest in the department-store chain. That move left the impression that the value of Sears' real estate holdings may be not be fully reflected in its stock price. Since that Nov. 5 announcement, Sears' stock has jumped 25 percent. It closed at $45.20 in trading Tuesday on the New York Stock Exchange. Company officials said the merger would help make their properties more profitable through a broader retail presence and improved operational efficiency in areas such as procurement, marketing, information technology and supply chain management. "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," Lacy said. "This will clearly be a win for both companies' customers while significantly enhancing value for all shareholders." The merger will not affect agreements to carry home and fashion lines including Martha Stewart Everyday, Lands' End and Sesame Street, the companies said.
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Rich Beaver's

These eager beavers had a whole new slant on money laundering.A bag of bills stolen from a casino was snapped up by beavers who wove thousands of dollars in soggy currency into the sticks and brush of their dam on a creek in eastern Louisiana."They hadn't torn the bills up.They were still whole," said Maj. Michael Martin of the St. Helena Parish sheriff's office.The money was part of $70,000 to $75,000 taken last week from the Lucky Dollar Casino in Greensburg.St. Helena Parish deputies searched for the money for days until a lawyer,hoping to make a deal with prosecutors for a client,called and said the money had been discarded in the creek,Police Chief Ronald Harrell said.Officers searched the creek during the weekend,finding one money bag right away and spotting a second downstream against the beaver dam.The third bag of cash couldn't be found,Martin said,so deputies started breaking down the beaver dam to drain the pond it was holding.That was when they saw the dam's expensive decoration.They eventually found the missing bag,which the beavers hadn't completely emptied."The casino people were elated" to get the money back,even if some of it was wet,Harrell said.Altogether,deputies found about $40,000,and they expect to find the rest in a safety deposit box at a bank in Mississippi,authorities said.
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Suppliers Worry About Kmart-Sears Merger
Wal-Mart Stores Inc. is widely referred to among its suppliers as the 800-pound gorilla.What the giant retailer wants,it usually gets.
Now, many manufacturers must be wondering whether Kmart Holding Corp.'s pending acquisition of Sears, Roebuck & Co. will create a second behemoth that demands lower prices for their goods or, worse, drops them altogether. In announcing their marriage intentions Wednesday, the two retailers said they expect to save $300 million a year through "improved merchandising and non-merchandising, purchasing scale as well as improved supply chain, administrative and other operational efficiencies." For suppliers, the key words are "purchasing scale" and "improved supply chain." Those goals might translate into such buying power that to retain Sears/Kmart's business, manufacturers may be forced to go overseas to make products at a profit. "When they say they need a $49 price point for an electric drill, people have to come up with ways to do it," said Bill Drumm, president of Establish/Herbert W. Davis, a supply-chain consultant in Fort Lee, N.J. Significant U.S. manufacturing went offshore in order to meet the prices that Wal-Mart dictated, he said.Moreover, whereas several companies may be making drills for Sears and Kmart now, in the future the combined company may seek a single source. "Say today Sears has three suppliers of (something) and Kmart has three. Combining them you don't get six," Drumm said. "If I was No. 4 or 5, I would be concerned. If I was one of the top three I'd be thrilled." Indeed, Sears' biggest supplier of major appliances, Whirlpool Corp., believes the merger "will be a plus for us, absolutely," said spokesman Steve Duthie.He expects Sears will convert more Kmarts into Sears outlets, which means more locations where customers can buy Kenmore washers, driers and other appliances that Whirlpool makes under Sears' house brand.Asked whether Whirlpool expects the combined retailer to exact cheaper prices from it, Duthie replied, "We don't foresee that at all." He noted that Whirlpool has announced plans to increase its prices to retailers between 5 percent and 10 percent next year to reflect higher costs of steel and other raw materials.Sears now buys from more than 10,000 suppliers. The number of Kmart suppliers ? and their overlap with Sears ? couldn't be determined.
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Pink Locusts from North Africa Swarm Through Cairo
Swarms of pink locusts swept through the Egyptian capital on Wednesday, evoking the biblical description of the plagues which struck in the time of Moses.The swarms of millions flew high above tall towers or swooped down onto treelined streets, where scared pedestrians stamped on them or ran for cover.The flying insects arrived from neighboring Libya after devouring the countryside in central and western Africa in past months. But locust experts said they were unlikely to wreak similar havoc in Egypt, where agriculture is a cornerstone of the economy."This is really horrible," said one man as he ran past a building where locusts, some of them more than 3 inches (7.6 cm) long, smacked into office windows or landed on cars.Some of the locusts, which arrived and disappeared in waves, settled on shrubs and trees. Authorities battled swarms at Cairo international airport, but flights were unaffected."They are driven by strong winds ... Under current climatic conditions they will not likely cause damage," Christian Pantenius, a locust expert with the United Nations Food and Agriculture Organization told Reuters. Pantenius said the locusts would not feed voraciously when the temperature was under 30 degrees Celsius (86 degrees Fahrenheit). Forecasts put Cairo's temperature for the coming days at below 25 degrees Celsius.Pantenius said the locusts were arriving in medium-sized swarms. "They will very likely either die or migrate further to the south," he said, adding that the Saudi and Sudanese authorities had been alerted. The locusts appeared to be passing through Egypt and did not pose a threat to agriculture, Egypt's official Middle East News Agency quoting Agriculture and Land Reclamation Minister Ahmed el-Laithi as telling a news conference.Agriculture is a key sector of the Egyptian economy, employing millions of people in the North African country, which has a population of about 70 million.The locust swarms have already traveled on the wind from North Africa to Cyprus. They can form swarms of tens of millions, occupying hundreds of square kilometers (miles). In the Old Testament, locusts were the eighth of 10 plagues which God brought on the Egyptians before Pharaoh, their ruler, relented and let the enslaved children of Israel go. (Additional reporting by Esmat Salaheddin)
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Rare Blood Infection Surfaces in Injured U.S. Soldiers
An unexpectedly high number of U.S. soldiers injured in the Middle East and Afghanistan are testing positive for a rare, hard-to-treat blood infection in military hospitals, Army doctors reported on Thursday.
A total of 102 soldiers were found to be infected with the bacteria Acinetobacter baumannii. The infections occurred among soldiers at Walter Reed Army Medical Center in Washington, Landstuhl Regional Medical Center in Germany and three other sites between Jan. 1, 2002, and Aug. 31, 2004.Although it was not known where the soldiers contracted the infections, the Army said the recent surge highlighted a need to improve infection control in military hospitals.Eighty-five of the bloodstream infections occurred among soldiers serving in Iraq, the area around Kuwait and Afghanistan, the U.S. Army said in a report published on Thursday by the Centers for Disease Control and Prevention.Military hospitals typically see about one case per year.Army investigators said they did not know whether the soldiers contracted the infections on the battlefield, during medical treatment on the front line or following evacuation to Walter Reed, Landstuhl and other military medical locations."This organism is very widespread in the environment, and some of these patients are arriving with infections," said Maj. Paul Scott, a doctor in the Army's center for health promotion and preventive medicine. Scott said there was no evidence that biochemical agents played a role in spreading the infection. A baumannii, which is found in water and soil and resistant to many types of antibiotics, surfaces occasionally in hospitals, often spread among patients in intensive care units. The infection was also found in soldiers with traumatic injuries to their arms, legs and extremities during the Vietnam War. Spread of the infection is often halted when health-care workers wash their hands and those of their patients with alcohol swabs, actively monitor those with wounds to the extremities and promptly identify and quarantine the infected. Development of better drugs is needed to help contain future outbreaks of the infection, Army officials said. In some cases, the only effective antibiotic is colistin, an older drug that is rarely prescribed because of its high toxicity. The injured soldiers are being treated with a spectrum of drugs and are expected to recover from their infections. Health-care providers in the United States are urged to watch for A. baumannii infections among soldiers who have been recently treated at military hospitals, especially those who were in intensive care units.
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NBA Suspends 3 Pacers, 1 Piston for Brawl
Indiana's Ron Artest, Jermaine O'Neal and Stephen Jackson, and Detroit's Ben Wallace were suspended indefinitely by the NBA on Saturday for taking part in one of the ugliest brawls in U.S. sports history, a fight with fans that commissioner David Stern called "shocking, repulsive and inexcusable." League officials and police were examining videotapes of Friday night's melee and interviewing witnesses. The NBA issued a statement saying it was reviewing rules and security procedures "so that fans can continue to attend our games unthreatened by events such as the ones that occurred last night." Artest, O'Neal and Jackson ? who all threw punches at spectators in the stands or on the court at the end of the nationally televised Pacers-Pistons game ? were to begin serving their suspensions Saturday night, when Indiana hosted Orlando. Wallace's suspension will start at home Sunday night against Charlotte, the next game for the reigning NBA champion Pistons. The exact length of the four players' bans could be announced as early as Sunday. "I didn't start it. I just played the game," Wallace said Saturday before learning of his suspension. "The league is going to do whatever they feel needs to be done, and I don't have no problems with that." Pacers players did not immediately comment Saturday, but team CEO Donnie Walsh issued a statement saying, "responsibility for Friday night's action can be shared by many." Pistons CEO Tom Wilson said the team plans to use "playoff-level security" starting with Sunday's game, doubling the number of armed police and increasing other arena security personnel by about 25 percent. The brawl was particularly violent, with Artest and Jackson bolting into the stands near center court and throwing punches at fans after debris was tossed at the players. Later, fans who came onto the court were punched in the face by Artest and O'Neal. "We'll put it all together, take it to the Oakland County prosecutor's office and have them review it and they'll decide if there are any charges," Auburn Hills Deputy Chief Jim Mynsberge said."The whole fiasco could take weeks to decide," Oakland County Prosecutor David Gorcyca said. The next game between Indiana and Detroit is Dec. 25 at Indianapolis. The rivals, who met in the Eastern Conference finals last season, won't play each other in Auburn Hills, Mich., again until March 25. The melee was the talk of the league Saturday. Violence at NBA arenas is rare, even among the few franchises ? such as Detroit ? that draw a more rough-and-tumble crowd to courtside seats than in other cities. "I was in total shock. Unbelievable," said Mike Montgomery, who oversees security at Staples Center in Los Angeles. "You never expect something like that to happen. You prepare and train for an incident like that, but you never expect it." Wallace began the fracas by delivering a hard, two-handed shove to Artest after Wallace was fouled on a drive to the basket with 45.9 seconds remaining. After the fight ended, the referees called off the remainder of the game. Pacers players were pelted with drinks, popcorn and other debris as they rushed to the locker room. "This demonstrates why our players must not enter the stands, whatever the provocation or poisonous behavior of people attending the games," Stern said in his statement. "Our investigation is ongoing, and I expect it to be completed by tomorrow evening." The most recent example of an NBA player going into the stands and punching a fan came in February 1995, when Vernon Maxwell of the Houston Rockets pummeled a spectator in Portland. The league suspended him for 10 games and fined him $20,000. Among the harshest non-drug-related penalties in NBA history was a one-year suspension of Latrell Sprewell ? later reduced to 68 games ? for choking Golden State Warriors coach P.J. Carlesimo at practice.Kermit Washington of the Los Angeles Lakers drew a 60-day (26-game) suspension in 1977 for a punch that broke the jaw of the Houston Rockets' Rudy Tomjanovich during a game, while Dennis Rodman was suspended 11 games for kicking a courtside cameraman in the groin and six games for head-butting a referee. Artest was benched for two games this month for asking Pacers coach Rick Carlisle for time off because of a busy schedule that included promoting a rap album.Artest was suspended twice by the NBA last season, once for leaving the bench during a fracas at a Pacers-Celtics playoff game; the other for elbowing Portland's Derek Anderson. During the 2002-03 season, Artest was suspended five times by the NBA and once by the Pacers for a total of 12 games.Artest also once grabbed a television camera and smashed it to the ground after a loss to the Knicks two years ago. "People are putting all the burden on Artest, and I don't think that's fair," Houston coach Jeff Van Gundy said. "He's an easy target because of all the things he's been through. But some fans have gotten to a point where they think they can do or say anything." Toronto coach Sam Mitchell said: "Do I think the fans should share some of the blame? Yeah. But as professionals, as NBA players, you cannot go into the stands." The initial skirmish wasn't all that bad, with Artest retreating to the scorer's table and lying atop it after Wallace sent him reeling backward. But when a fan tossed a cup at Artest, he stormed into the stands, throwing punches as he climbed over seats."He was on top of me, pummeling me," fan Mike Ryan of Clarkston said. "He asked me, 'Did you do it? I said, 'No, man. No!'" Jackson joined Artest and threw punches at fans, who punched back. At one point, a chair was tossed into the fray. Security personnel and ushers tried to break it up. Former Pistons player Rick Mahorn, who was seated courtside as a Detroit radio analyst, also stepped in. "After the initial encounter on the court, the players were under control. As fans quickly became involved, the situation escalated," Walsh said. "More specifically, the safety of everyone present was compromised, and that is of great concern for us." Two of the nine people treated for injuries were taken to a hospital, police said. Detectives planned to collect and analyze video footage, interview witnesses and examine medical records.
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