Sears, Roebuck to purchase Lands' End Inc. for 1.19 time revenue

Weekly Corporate Growth Report, May 20, 2002

The Deal: Sears, Roebuck & Co. has agreed to make a tender offer of $62 per share (about $1.86 billion) for Lands' End Inc. The boards of both companies have approved the transaction and Lands' End's chairman and founder, Gary Comer has agreed to tender his shares. Lands' End will become a subsidiary of Sears upon completion of the deal. The deal is expected to close in June 2002.

Discussion: Lands' End markets casual wear for men, women and children through a variety of sales channels. The company promotes mail-order sails through its catalogs and runs retail stores in the United States, the United Kingdom, and Japan. In addition to clothing, the company sells accessories, home goods, luggage, and corporate gifts.

Sears is one of the top retailers in the United States. It operates more than 860 mall-based stores across the country. The company sells its own private label brands of apparel, tools, and appliances. The company's specialty operations include about 470 automotive and hardware stores and almost 800 independently owned Sears stores that serve small towns.

Sears expects the acquisition to have a slightly negative effect on earnings in the remainder of 2002 and in 2003, but expects that it will add to earnings in 2004. The acquisition is part of Sears' apparel strategy and gives the company more nationally recognized clothing brands. The acquisition will also improve the company's direct order business.