About Sear Holdings - Farah Atelier

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Saturday, December 8, 2018

About Sear Holdings


There are many companies in the United States that has managed to survive for a long time and influenced the country’s economy positively. One such company is Sears Holding Corporation, considered to be an American holding firm, with its head office based in Hofman Estates, Illnois state. It was established after the large chain store Kmart purchased Sears in 2005 and is currently the parent company. In 2015, it was listed as the country’s 20th largest retailing firm.

Its formation

Kmart Holding Corporation’s management on 17th November 2004 had announced the desire to purchase Roebuck & Co. Sears under the new corporation. On 6th May 2003, Kmart had emerged from its Chapter 11 bankruptcy. This new corporation that came into existence after the purchase became Sears Holdings. Announcements were made by the new corporation that the stores will continue to be operated under both Kmart and Sears brands. It was on 24th March 2005 that Sears and Kmart merger got completed, following affirmative votes from both the company’s shareholders. Merger subsequently resulted in Sears, Kmart and the parent company Kmart Holding Corporation becomes new Sears Holdings Corpn. Subsidiaries. Now, both Kmart and Sears stores are operated by Sears Holdings. Investors have been able to make good shld earnings and benefitted financially.

Reasons for the merger

There were several reasons cited by the two companies for its merger, which are shared below:

·         Sears had started to make investments in the larger, new off-mall stores known as Sears Grand. Previously, dozens of currently running Super Kmart locations had been purchased by Sears already. This process only got further acceleration with the merger.

·         Both companies held proprietary brands which could now be made easily accessible to target demographics. This was done by leveraging its combined real-estate holdings. The estimation was predicted to approx. $2 million/ year only in revenue synergies.

·         Shared customer focused corporate culture setup between the two had been estimated to ensure improvements in per unit area revenue.

·         Also was expected annual cost savings of minimum of $300 million/year, exclusively in administrative overhead and supply chain.

·         Although the merger took place, the two brands were well preserved, thereby allowing Sears Holdings to focus continuously on the different customer demographics. This way, no group had been alienated.

It is the board of directors that comprise of members from both the companies that directs Sears Share Holdings, with the count being 3 from Sears and 7 from Kmart’s board. The new company provided one share to shareholders of Kmart Holding Corporation, while Sears, Roebuck & Co. stock got converted to 55% stock and 45% cash combination at $50/share. Also, the stockholders were given choice to receive either cash or stock that is subjected to predefined ratio.

Once regulatory approval was received from the concerned government authorities along with shareholder approval from both the companies, the merger got completed on 24th March, 2005. With such a good and strong background, this company is safe for investment as it is geared to fight all drawbacks and come with a positive turnaround in the future.

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