Discount retailer Kmart is to buy department store operators Sears

The surprise deal is worth just under 9 billion Euros and will create the third-largest US retailer.

The new concern will be called Sears Holdings and will boast some 3,500 stores and generate 42 billion euros in annual revenue. Both Sears and Kmart have been struggling and said in a joint statement that the merger would generate significant cost savings. Analysts say the merger should give the retailers greater strength in the marketplace and enable them to swap or sell shop sites.

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