Shareholders in Kmart and Sears Roebuck on Thursday approved the discount chain’s $12.2bn acquisition of the veteran department store at separate meetings in Chicago.

The deal, which will create the third largest US retailer, won 69 per cent of the votes of both sets of shareholders.

Lampert’s big idea

At the Big Kmart in South Plainfield, NJ the work of merging the discount retailer with Sears department stores is already underway.

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The merger, announced in November, is the brainchild of Edward Lampert, the investor who brought Kmart out of bankruptcy in May 2003, and whose ESL investment fund is also the largest investor in Sears.

Mr Lampert said in a statement following the approval that the new merged company, to be called Sears Holdings would provide “heightened value” for customers, employees and shareholders. “Sears Holdings will have an enviable stable of proprietary brands, strong points of distribution and enhanced growth opportunities,” he said.

Alan Lacy, chairman and chief executive officer of Sears, also welcomed the approval, which was opposed by some of the company’s retirees, saying that shareholders had recognised the “strategic and economic benefits” of the merger.

The merger will create a retailer with about $55bn in annual sales and nearly 3,500 stores. Kmart has said that some 400 of its stores will initially be converted to the Sears name.

The companies have said the merger will create annual “synergies” of $500m within three years. Mr Lacy said about $200m of htis would come from sales growth, mainly from the new Sears Essentials off-mall format. Another $300m will come from cost savings in areas including sourcing and corporate job cuts.

Analysts also expect the merger to be followed by sales of some of Sears’ assets, possibly including its Lands’ End mail order apparel unit. However, Mr Lampert told a news conference following the shareholders’ meetings that the Lands’ End unit was “not for sale”.

Shares in both Kmart and Sears have risen by over 25 per cent since the deal was announced. On Thursday Sears’ shares dropped over 11 per cent in New York, to around $50, reflecting the fact that shares bought on the day will not be converted into stock in the new company, but bought back for that amount. Kmart’s shares rose 1.4 per cent to $126.30.

Shares in the new Sears Holdings begin trading on Monday on the NASDAQ exchange.