• by David Kaplan , November 17, 2004

With the announcement that Kmart was buying rival Sears, Roebuck and Co. for $11 billion Wednesday, and create the nation's third-largest retailer, media agencies were primed to see whether the collective $1 billion in media spending from the two companies would be hitting the market.

Currently, Sears spends an estimated $800 million on media and employs WPP Group's MindShare to handle media duties, while fellow WPP shops Young & Rubicam and Ogilvy & Mather, share creative. Kmart uses Grey Global Group's MediaCom and Grey Worldwide to run its $150 million media and creative accounts, respectively.

But with WPP itself in the process of merging Grey into its family of agencies, it is relatively assumed that the media will stay under WPP's umbrella, at least for the time being. Early this fall, WPP announced its intention to buy Grey for $1.3 billion. The deal is expected to be finalized by the end of the year.

Calls to the ad agencies as to what sort of arrangements would likely occur with regard to the two clients were not returned.

"There are certain natural efficiencies of having it under WPP once Sears and Kmart merge, so I wouldn't expect the usual rush to do an agency review as you would after most merger announcements," one veteran media buyer said. "Besides, one of the main reasons to immediately do a review after a merger is because of conflicts. Obviously, that would not be the case here, because both mergers are dovetailing here, at least from an agency perspective."

The deal between the two retailers is expected to close in March, a Sears spokeswoman said.

"There are no changes in ad agencies planned at this time," said the Sears spokeswoman. "Since we just announced the merger today, naturally any talk of changing agencies is premature. Any decisions related to marketing would probably be made closer to the March closing date."

Should the merger be approved, the new entity would be called Sears Holdings Corporation and headquartered in Hoffman Estates, Ill., and Kmart will continue to have a significant presence in Troy, Mich. The company would have approximately $55 billion in annual revenues - which puts it behind the nation's No. 1 retailer, Wal-Mart, and the No. 2 retailer Home Depot - as well as 2,350 full-line and off-mall stores, and 1,100 specialty retail stores. Edward Lampert, chairman of Kmart, will be the chairman of Sears Holdings and will be joined in the Office of the Chairman by Alan J. Lacy, currently chairman and chief executive officer of Sears, and Aylwin Lewis, current president and chief executive officer of Kmart.