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The Chicago Sun Times reports that some retail analysts believe that Kmart Corp. and Sears could be headed for a merger, in part because they have in common a single major shareholder.

Connecticut multimillionaire and hedge fund manager Edward Lampert is Sears’ second biggest shareholder, and will become Kmart’s biggest stockholder when it emerges from bankruptcy, an event expected to happen later this month. He’s also slated to become a member of Kmart’s new board of directors.

Among the theories of what could happen if they merge:

  • They play off their individual strengths, combining the brand power that they have with their Lands’ End and Martha Stewart labels.

  • If Kmart doesn’t make it, Sears could grab the best leases and be in a better position to compete with the likes of Kohl’s and Target.

  • Even if both companies fail, Lambert ends up owning some great store leases, which could put him in a good negotiating position when dealing with other retailers.

The Sun Times notes that Sears CEO Alan Lacy and Kmart CEO Julian Day worked together at Sears, reporting to former Sears CEO Arthur Martinez. Day left Sears after he lost the CEO job to Lacy.

Lampert has not commented on the speculation, and Sears says that there is no relationship between the two companies. Kmart officials are not commenting.
KC's View:
If these two companies merge, it’ll prove once and for all what the softer side of Sears really is: its brain.

It strikes us that Kmart and Sears are entirely different retailing experiences, neither of them particularly appealing, and that combing them doesn’t put either one in a better position to compete with Wal-Mart -- which is, after all, the endgame.

There may be some lease benefits in a merger, but there seems to be no specific benefit for the consumer. And that ought to be the priority in any sort of merger.

Of course, it is all speculation at this point, and it is hard to know if there’s any meat to it.