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Title: Acquisition of Sears and Kmart
The rapidity of development of businesses today requires the knowledge of all processes associated with leading companies in Canada and the United States as well as in the rest of the world. This is a free extract from business school essay created by one of our writers. This business essay sample is the property of Essay-Paper.net. If you use this business essay paper, you should cite it properly.
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The Kmart Holding Corporation informed about its intention to acquire Sears and all business publications all over the country reported on the outcomes on the retailers, the real estate implications and the resolve of this step. It is clear that the acquisition of Sears by Kmart Holding Corporation may change the course of future corporation’s actions and plans. The Kmart is presently number three retailer after Wal-Mart and Target in the country. An academic analysis that was conducted on this event states the positive and negative results of the acquisition.
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Tom Speh, the Rees Distinguished Professor of Distribution at Miami University, thinks the acquisition is a wrong step in this situation: "I do not think these companies have clear aims and will fit each other," he states. "It is not a similar situation with a merger of Kraft and Nabisco where one takes present opportunities and sells more product to reach the greater benefit. Until this moment, I do not see a weighty reason for acquisition."
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The next problem is whether the new Sears Holdings Corporation will announce about a new mandate from its suppliers concerning the adoption of RFID technology. It will become clear only after the acquisition will be approved by regulators and shareholders. Tompkins' opinion is the following: "I do not think RFID technology will be presented in the nearest future," he points out. "The Kmart and Sears companies represent quite the opposite cultures and they will be out of business together." The shares of Kmart and Sears companies, two old-line department-store chains that were experiencing a stock- market renaissance, surged on.
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The companies had strictly equal market capitalizations heading into the merger, with Sears' 206.7 million outstanding shares worth about $9.35 billion and Kmart's 89.6 million shares worth $9.07 billion. Examined as an acquisition of Sears, the cash price is a 10.5% premium to Tuesday's close while the stock component is valued at a 11% premium. Sears stock was recently up $10.10, or 22.2%, to $55.30. Kmart shares were also rising greatly, recently up $17.10, or 16.5%, to $118.33. The merger pairs two companies whose market price comes mostly from perceptions about the value of the real estate underlying their stores.
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The merger brings together some other powerful brands that have succeeded while their parent companies' retail results have sagged, among them Craftsman tools, Kenmore appliances and, from Kmart, Jaclyn Smith and Joe Boxer. Employees have been concerned about widespread job cuts when the new company moves to close stores and convert hundreds of Kmart stores this year to the new Sears Essential convenience-oriented format.
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