The new company, which will be called Sears Holdings Corp., will become the nation's third-largest retailer. It will continue to occupy Sears headquarters in suburban Hoffman Estates.
Lampert and Sears Chairman Alan Lacy said Wednesday that the idea behind the merger is to build up a new company, not tear down an old one. But they also are betting that a new management team can forge a single, lower-cost competitor out of two perennial laggards, which likely will mean selling off some stores and cutting redundant operations.
"This is going to be an enormous undertaking," said Lampert, who owns 52.6 percent of Kmart and 15 percent of Sears. "We'll need the best of the Kmart team and the best of the Sears team."
The new Sears will marry the originator of the "blue light special" with a retailer that has been an essential part of the Chicago business fabric since it was founded as a scrappy catalog company in 1886. Both have been in decline for decades. Industry giants such as Wal-Mart Stores Inc. and Home Depot Inc. passed them years ago.
But the new company will have greater scale--about $55 billion in sales and almost 3,500 stores. Among other advantages, that should help it negotiate lower prices from suppliers.
Lampert and Lacy plan to push Kenmore appliances, Craftsman tools and DieHard batteries into Kmart's discount outlets at the same time they spruce up Sears' department stores with Kmart's popular Martha Stewart line of linens, kitchenware and garden tools.
Lampert said he has identified ways to wring almost $500 million in savings by combining such things as distribution and purchasing. He pointed out that the company buys $40 billion worth of goods a year, leaving plenty of room to drive down costs by working with suppliers to be more efficient.
Neither Lampert nor Lacy gave an estimate of how many jobs might be lost in this process. But they made it clear that one idea behind the merger is to cut costs and eliminate duplicative operations.
Lampert likened the effort to the merger craze among financial institutions in the 1990s, when many banks enhanced their services while squeezing costs out of their back-office operations. Thousands lost their jobs during that consolidation.
Watching Sears get gobbled up by a once-bankrupt competitor gave many Chicagoans a chill Wednesday.
"It's so much a part of Chicago," said June Rosner, owner of a public relations firm that bears her name. "It would be like losing Lake Michigan."
But economic development officials breathed a sigh of relief that the company will remain based in Hoffman Estates.
"The No. 1 issue is where the headquarters is," said Paul O'Connor, executive director of World Business Chicago. "That's the ultimate pelt in the economic development business."
Investors in Sears and Kmart stock were less sentimental.
"Christmas came early this year," said Chicago investor Jeffrey Maillet, whose Noble Asset Management LLC owns stock in both companies. Sears finished 17 percent higher, at $52.99 a share, while Kmart, which is up 355 percent this year, added another $7.78, to finish at $109.
The deal will pay Sears shareholders $50 in cash or half a share in the new company for every share they own.
Sears stock, which languished 43 percent below its one-year high as recently as late October, has been on the move since Nov. 5. That's when a real estate investment company, Vornado Realty Trust, revealed it had purchased 4.3 percent of Sears, giving the Big Store's stock a 23 percent boost in one day.