Target Corp. (TGT) announced Thursday it is selling its Mervyn's business unit and retail stores to an investment consortium for roughly $1.65 billion in cash.

Under terms of the agreement, Target will sell its Mervyn's retail subsidiary, including 257 Mervyn's stores and four distribution centers, to an investment consortium, which includes Sun Capital Partners, Inc. (search); Cerberus Capital Management, L.P. (search) ; and Lubert-Adler/Klaff and Partners, L.P (search).

In addition, Target will sell Mervyn's credit card receivables, totaling approximately $475 million, to GE Consumer Finance, a unit of General Electric Co. (GE). 

Mervyn's, a middle-market department store with 257 stores in 13 states, will continue to operate as an independent company from its headquarters in Hayward, Calif.

The transaction is subject to regulatory approval. Target said the sale is expected to result in an estimated gain of about $270 million pretax, or about 18 cents per share, in the third quarter.

Last month, Target announced it was selling its 62 Marshall Field's (search) stores to May Department Stores Co. (MAY) for $3.24 billion in cash. The deal included three distribution centers, nine Mervyn's locations in Minnesota's Twin Cities, plus about $600 million owed on Marshall Field's credit cards.

Target stores began as an outlet in a Minneapolis suburb for Dayton's department stores in 1962. By 1977, Target stores were the company's biggest moneymaker, and Dayton Hudson changed its name to Target Corp. in 1999. In 2001, the company adopted Marshall Field's as the name for all of its department stores.

Growth at the company's flagship Target stores has far outpaced Mervyn's and Marshall Field's for years. In the first quarter of 2004, Mervyn's revenue and comparable-store sales both dipped 1.4 percent, with revenue of $793 million. Revenue increased 4 percent to $614 million at Marshall Field's, and comparable-store sales were up 6.1 percent. Meanwhile, revenue from Target stores increased 14 percent to $10 billion.

Target Corp. will continue to operate its flagship Target Stores. It has 1,272 stores in 47 states, as well as Target.com.