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DETROIT – While backers of the Kmart-Sears merger won’t face antitrust challenges, there was new speculation this week that another offer could emerge for Sears Roebuck and Co.

Sears Holdings Corp., as the merged Kmart Holding Corp. and Sears will be known, cleared its first hurdle Friday, with the deadline passing for the government to raise antitrust concerns under the federal Hart-Scott-Rodino Antitrust Act.

The companies still need shareholder and other government approvals to consummate the deal, which is expected to conclude in early March.

Meanwhile, an analyst raised the possibility that Kmart Chairman Edward Lampert could get a run for his money from Vornado Realty Trust, which disclosed a 4.3 percent stake in Sears Nov. 5. Lampert, the majority shareholder of Troy, Mich.-based Kmart, also has a 15 percent stake in Hoffman Estates, Ill.-based Sears.

But another retail industry expert doubts that a derailment of the Sears-Kmart merger is on the horizon.

“This deal, in my view, is going through,” said Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment banking firm in New York. “This is a done deal.”

Vornado filed a $7.5 billion registration with the U.S. Securities and Exchange Commission late Wednesday consisting of $5 billion in debt and $2.5 billion in equity.

The registration positions Vornado to sell shares at some future date. The company did not indicate what it planned to do with any proceeds it might raise.

Prudential Equity Group analyst Wayne Hood – known in retail circles for predicting Kmart would declare bankruptcy just weeks before it did so in January 2002 – issued a report Wednesday noting that “Vornado could be positioning itself to make a second bid for Sears.”

Hood theorized that Vornado “could partner with another party to rival Kmart’s offer for Sears.” This follows a report in December by Citigroup Smith Barney’s research unit that also speculated Vornado could team with another financier to make a competing offer for Sears.

The $11 billion deal to combine Sears and Kmart would create the nation’s third-largest retailer with $55 billion in sales, 3,500 stores and some of America’s best-known brand names including Craftsman, Kenmore, Lands End, Martha Stewart Everyday and Joe Boxer.

The merger is also expected to cut operating costs by $300 million a year plus provide cross-merchandising opportunities as each retailer sells the other’s brands of up to $200 million a year.

But the idea that Vornado Chairman Steven Roth would attempt a battle over Sears seems out of character, Davidowitz said Friday. Davidowitz worked with Roth on his attempted bid for Mervyn’s and other deals over the years. Vornado lost out to a group led by Sun Capital Partners Inc., which bought the department store chain from Target Corp. for $1.65 billion last year.

“I think what is in Wayne Hood’s report is wrong. Steve Roth has never gotten involved in a bidding war in his life,” Davidowitz said. “What he’s been in is auctions. He’s over 60 years old. … He has a very long track record.”

Davidowitz said it’s more likely that Roth is busy with a possible offer for Toys R Us Inc. or any number of other options he is considering.

“He’d be crazy to start in bidding on Sears because there’s no way that Lampert is going to back off,” he said. “It would be expensive for both.” Some of the Vornado speculation comes from its accumulation of Sears stock, which it disclosed before Lampert announced the largest merger in retail history.

So far, Wall Street hasn’t put much credence in the speculation. The volume of trading in Kmart Holding, Vornado and Sears stocks has been average on most days since November. On Friday, Kmart Holding shares closed down 41 cents to $93.94; Sears shares were off 3 cents to $50.05 and Vornado stock declined 18 cents to $69.05.

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AP-NY-01-28-05 1932EST

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