Sears to Sell Credit and Financial Products Business to Citigroup; Sears To Net $6 Billion in Pre-Tax Cash Proceeds

Companies to Establish 10-Year Strategic Alliance Generating Additional Performance Payments, Cost Savings

Sears, Roebuck and Co. (NYSE: S) today announced it has entered into a definitive agreement to sell its entire Credit and Financial Products business to Citigroup (NYSE: C) for approximately $32 billion, representing approximately a 10 percent premium to Sears' $29 billion gross domestic credit card receivables portfolio. As part of the transaction, Sears and Citigroup will also enter into a long-term marketing and servicing alliance with an initial term of 10 years. The transaction has been approved by both companies' boards of directors and is expected to close by year-end 2003, subject to customary regulatory review and closing conditions.

Under the terms of the transaction, at closing Sears will net pre-tax cash proceeds of approximately $6 billion, which represents approximately a $3 billion premium on receivables and approximately $3 billion of Sears' net invested capital.

Strategic Alliance

Under the long-term marketing and servicing alliance, Citigroup will provide credit and customer service benefits to Sears' proprietary and Gold MasterCard holders. As part of the alliance, Sears expects to receive approximately $200 million in annual performance payments from Citigroup based on items such as new account and credit sales generation activities. In addition, Sears expects to realize annual savings of more than $200 million as Citigroup will absorb costs associated with Sears' zero percent financing program.

Upon completion of the transaction, substantially all of the approximately 8,300 employees of Sears' Credit and Financial Products business will become employees of Citigroup and Citigroup also will assume ownership of the business' operating facilities.

"This is a great deal for Sears, its customers and shareholders," said Alan J. Lacy Sears chairman and chief executive officer. "Our customers will enjoy broader credit and financial products opportunities and continued high levels of service, while Sears gains an additional source of profitability and greater financial flexibility. We are delighted to be involved in a strategic alliance with Citigroup. They are a world leader in proprietary, co-branded and general purpose cards, with world class technology, powerful financing capabilities and excellent customer relationship management skills."

Lacy added, "This strategic action will also create significant value for our investors by accelerating progress toward building a Sears that is completely focused on growing our core retail and related services business, further simplifying our organization, strengthening our financial position and returning substantial proceeds to shareholders. With the completion of this transaction, Sears will stand as a focused, well-financed retail leader, with substantial earnings and a strong balance sheet."

Sears' domestic credit card business includes 59 million total accounts, of which 23 million are active. This portfolio represents the eighth largest in the U.S. and includes the largest remaining in-house private label portfolio. Both the Sears proprietary card and Sears MasterCard will continue to be offered through Citigroup and the transition will be transparent to Sears customers.

"The combination of Sears' exceptional distribution channel and customer base and Citigroup's industry leadership position in cards and excellence in customer service will create powerful new growth opportunities for both companies," said Robert B. Willumstad, president of Citigroup and chairman and chief executive officer of Citigroup's Global Consumer Group. "Citigroup looks forward to delivering even higher levels of service to Sears' 59 million credit card customers, capitalizing on new opportunities to expand this portfolio, and leveraging our proven ability to maximize the potential of the card business."

Use of Proceeds

Proceeds from the transaction are intended to be used primarily to retire debt, return cash to Sears shareholders and for general corporate purposes. After retirement of debt, the company expects that approximately $4 billion to $4.5 billion in cash will be available. Following the expected distribution, Sears expects to have approximately $1.5 billion of debt, net of cash reserves held for future paydown of remaining outstanding debt.

Sears is a leading retailer in the U.S. and Canada, with $35.7 billion in merchandise sales and services revenues in 2002. The company is the No. 1 retailer of home appliances, fitness equipment and lawn mowers, and holds leading positions in many other categories. In addition, Sears is the exclusive provider of several leading brands, including Kenmore, Craftsman, Lands' End and DieHard. Sears owns a substantial direct-to-customer operation and is the largest product repair service provider in North America, making 14.5 million service calls annually.

About Sears

Sears, Roebuck and Co. is a broadline retailer with significant service and credit businesses. In 2002, the company's revenue was $41.4 billion. The company offers its wide range of apparel, home and automotive products and services to families in the U.S. through Sears stores nationwide, including approximately 870 full-line stores. Sears also offers a variety of merchandise and services through its Web sites,, and, and a variety of specialty catalogs.

About Citigroup

Citigroup (NYSE: C), the preeminent global financial services company with some 200 million customer accounts in more than 100 countries, provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, insurance, securities brokerage, and asset management. Major brand names under Citigroup's trademark red umbrella include Citibank, CitiFinancial, Primerica, Smith Barney, Banamex, and Travelers Life and Annuity. Additional information may be found at: .

Webcast Scheduled

Sears will webcast an analyst and investor conference call today at 5:00 p.m. EDT/4:00 p.m. CDT. The conference call will be webcast live over the Internet at From the Investor Relations page, select "Events and Webcasts." The webcast will be archived and available on the company's website at, also under "Events and Webcasts." Software necessary to listen to the webcast, Windows Media or Real Player, can be downloaded from the webcast site. Downloading the software may take up to 22 minutes with a 56K modem.

Forward-Looking Statements

This press release and this morning's webcast contain forward-looking statements about Sears' expectations regarding the sale of its Credit and Financial Products business and its alliance with Citigroup, including statements concerning expected benefits to Sears and the timing of closing of the transaction. Statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "project," "estimates," "plans," and similar expressions or future or conditional verbs such as "will," "should," "would," "may" and "could" are generally forward- looking in nature and not historical facts. These forward-looking statements are based on assumptions about the future that are subject to risks and uncertainties, and actual results may differ materially from the results projected in the forward looking statements. Risks and uncertainties include the possibility that the transaction does not close, that the companies may be required to modify aspects of the transaction in order to achieve regulatory approval or other factors outside the control of Sears and Citigroup. Further risks and uncertainties that may cause actual results to differ materially include Citigroup's ability to integrate and operate the Credit and Financial Products business successfully and the ability of Sears to successfully integrate its retail businesses with a third-party credit card program, which involves significant training and the integration of complex systems and processes; the manner in which Citigroup operates the Credit and Financial business, which may be different than the manner that such business was operated by Sears and the impact of any such differences on Sears' Retail business; conditions in retail and credit; changes in consumer confidence and spending; consumer debt levels and the level of consumer bankruptcies; the success of the Full-line store strategy and other strategies; the possibility that Sears will identify new business and strategic options for one or more of its business segments, potentially including selective acquisitions, dispositions, restructurings, joint ventures and partnerships; Sears' ability to integrate and operate Lands' End successfully; the outcome of pending legal proceedings; anticipated cash flow; social and political conditions such as war, political unrest and terrorism or natural disasters; the possibility of negative investment returns in Sears' pension plan; changes in interest rates; the volatility in financial markets; the possibility of interruptions in systematically accessing the public debt markets; changes in Sears' debt ratings; and general economic conditions and normal business uncertainty. In addition, Sears typically earns a disproportionate share of its operating income in the fourth quarter due to seasonal buying patterns, which are difficult to forecast with certainty. The company intends these forward- looking statements to speak only as of the time of this release and does not undertake to update or revise them as more information becomes available.

SOURCE: Sears, Roebuck and Co.

CONTACT: Media, Edgar P. McDougal, +1-847-286-9669, or Investors,
Pam White, +1-847-286-1468, both of Sears, Roebuck and Co.

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