Kmart Corp. and Waban Inc. say they are discussing combining their Builders Square and HomeBase businesses to create the nation's No. 3 home-improvement store chain.
The new chain would have about 250 stores in 25 states and annual sales of about $4 billion.The Kmart and Waban stores would combine under a privately owned company after a "cash infusion" to buy ownership away from the two corporations, said Robert Burton, investor relations director of Kmart. That dollar amount hasn't been finalized, company officials said.
"It gives the company the opportunity to go become a national chain instead of being two regional chains," Burton said. "That'll give it a much better shot at being competitive in a national market."
Kmart had hoped to sell its 168-store Builders Square chain, based in San Antonio, Texas, by the end of 1996. Waban, based in Natick, Mass., operates 84 HomeBase stores in 10 Western states, which have generally turned a yearly profit margin of $50 million.
In trading Monday on the New York Stock Exchange, Kmart stock rose 121/2 cents a share to close at $11.25, and Waban gained 50 cents to $27.621/2.
Under the buyout proposal, which the companies hope to approve by April, a majority of the new company would be held by Leonard Green & Partners of Los Angeles, a firm that specializes in management buyouts.
Kmart and Waban would each retain minority interest in the company, which Burton said Kmart may ultimately shed altogether. No name has yet been suggested for the new company or its stores.