Integrated retailer Transform Holdco, which owns Sears and Kmart, has signed a definitive merger agreement with Sears Hometown and Outlet Stores.

Transform will purchase the outstanding shares of Sears Hometown that are not owned by ESL Investments and its affiliates for a price of $2.25 a share in cash.

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The all-cash transaction reunites Sears and Kmart with Sears Hometown, and enables Transform’s strategy of expanding its footprint as a multi-channel business.

Transform chair Edward Lampert said: “We are excited to bring Sears Hometown, its associates and network of independent dealers and franchisees back into the Sears and Kmart family.

“We believe that reuniting our Sears Hometown segment stores with Transform’s Sears full-line stores will result in a more consistent customer experience.”

“While, initially, the companies will operate independently, we see many opportunities where we can partner to serve our customers better and enjoy efficiencies of scale once these businesses are under one roof.”

Currently, Sears Hometown operates a network of 491 Hometown stores and 126 Outlet stores across 49 states. It generated $1.4bn in revenue last year.

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The combined entity will become the third largest appliance retailer in the US, in terms of sales.

Sears Hometown will be able to market and sell its Sears Outlet and Buddy’s Home Furnishing Stores businesses to a third party for a specified period of time for no less than $97.5m.

If the Outlet Segment is sold in accordance with the terms of the agreement, it will not be acquired by Transform in the acquisition of Sears Hometown.

The transaction is expected to close in the third quarter of this year.

Sears Hometown and Outlet Stores president and CEO Will Powell said: “We believe that reuniting our Sears Hometown segment stores with Transform’s Sears full-line stores will result in a more consistent customer experience across Sears branded storefronts, generate higher total revenues and leverage efficiencies of scale to improve costs and margins, all of which could lead to improved profitability for Sears Hometown’s dealers and franchisees.”