Please perform your own research regarding the Kmart/Sears merger and answer the
ID: 2762607 • Letter: P
Question
Please perform your own research regarding the Kmart/Sears merger and answer the following questions:
a. What major event for Kmart occurred in 2002? How was that issue resolved?
b. What form of business combination brought Sears and Kmart together, and what was the resulting corporate structure?
c. In the business combination involving Sears and Kmart, which company acquired the other? On what basis was this determination made? What accounting implications did the choice of acquirer have?
d. Perform some internet research and comment on how successfully or unsuccessfully the merger of the two companies has been viewed.
The original Form S-4 relating to the transaction filed with the SEC can be found here. http://www.sec.gov/Archives/edgar/data/1310067/000104746904035972/a2147581zs-4.htm
Explanation / Answer
Answer:a Kmart Declared Chapter 11 bankrupty on jan 22, 2002. The company recognized and emerged from bankrupty on 6 may 2003.
Answer:b The business combination was a stock acquisition in the form of a consolidation. That is, a new corporation was formed to acquire the two combining companies, Kmart and Sears, Roebuck. After the combination, the parent company, Sears Holdings Corporation, held all of the stock of Sears, Roebuck and Co. and Kmart Holding Corporation.
Answer:c Kmart was designated as the acquiring company. This determination was made on the basis of relative share ownership subsequent to the combination, makeup of the combined company's board of directors, makeup of senior management, and perhaps other factors. Given that Kmart was considered to be the acquirer, the historical balances of its accounts became those of the parent company, Sears Holdings.