Sears gunning to buy Safeway ... or Home Depot

With Eddie Lampert's Sears Holdings (NYSE: SHLD) being pressured to bring in the profits after the recent merger with Kmart, will the company report stellar earnings and revenues next Thursday when its Q3 numbers are due?

Whatever they may be, rumor has it on The Street today that Sears Holdings Corp. may be interested in acquiring Pleasanton, CA-based Safeway, Inc. (NYSE:SWY) in a merger of department stores and grocery retailers. Say what?

Although financier Lampert is known for purchasing assets he feels are undervalued, a merger between Sears and Safeway would be on odd case study indeed to dissect. Analysts on the Street indicated that a deal like this could be worth $20 billion.

Lampert even went as far as to say "Our strong financial position and cash flow generation provide us with the flexibility to capitalize on a wide range of market opportunities as they arise ... we are prepared to invest substantial amounts of capital if we identify other attractive investment opportunities." Hmm, that smells rather generic but also suspicious. In addition to a possible buyout of Safeway, the Chicago Sun Times reported yesterday that Sears could also be considering San Francisco-based Gap, Inc. (NYSE:GPS), Home Depot Inc. (NYSE:HD) and Anheuser Busch Cos. (NYSE:BUD).

With the grocery business having notoriously thin margins, most likely any company except Safeway would be a better bet. But Sears and Home Depot? Okay, let me close my eyes and imagine that for a second.