Kmart was in bankruptcy protection for a while but has been out of it since May 2003. They closed a whole lot of stores and laid off a whole bunch of people and are now once again profitable.

Sears has a new concept called Sears Grand which is similar to a Super Wal-Mart or Target Greatland, and was originally going to buy some of Kmart's closed-down locations to open up more of em. Now with the merger Sears has access to all of those closed-down locations.

Also like Rick said, with a larger company comes lower prices because they buy in higher quantities.