Sears, KMart and the evolution of the firm
By Larry Ribstein on Corporate governance - Ideoblog
I said a few days ago that the Sears-KMart deal involved "squeezing value out of the brands and the real estate." More precisely, WaPo's Jerry Knight says it's really about taking Sears brands out of malls and putting them into KMart's real estate. So the KMart brand will die, having been crushed between Wal-Mart and Target.
But now I have some questions:
1. Couldn't KMart get more for its real estate by selling each parcel to the highest bidder? Maybe not, if its locations are just the right fit for Sears' brands.
2. But then, is there really that much value left in the Sears brands, again given Wal-Mart and Target?
3. Why leave the real estate portfolio in the combined corporate entity -- i.e., why not spin it off into a tax-advantaged REIT or a limited partnership, and chuck the double corporate tax?
Sears has come a long way from the integrated manufacturing/retailing behemoth that Alfred Chandler, Jr. used as key example of the Visible Hand. Not long ago Sears sold off (to Citibank) its credit operation, which comprised more than half of its value.
More generally, this is all part of the fundamental reshaping of the modern firm, which led me to wonder in Why Corporations? whether we really needed the bulky corporate entity anymore. When Sears, Roebuck, the very model of the modern corporation, with single-letter stock symbol, becomes an LLC, we'll know for sure the world has changed.
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