NEW YORK (CNN/Money) - Shares of Martha Stewart Living surged to a two-and-a-half year high Wednesday after Kmart agreed to purchase Sears in a deal that could greatly expand the distribution of the home decor maven's signature brand.

Martha Stewart Living Omnimedia (up $3.20 to $20.60, Research) shares jumped 15 percent to a trade around the $20 level after the two retailing heavyweights announced the $11 billion merger. The last time the stock had touched the $20 level was in mid-May of 2002.

The stock had seen a strong run before the Kmart-Sears merger as Martha Stewart decided to serve her jail sentence before a court ruled on an appeal in her obstruction of justice case and reality TV show producer Mark Burnett agreed to make a show based on Stewart.

Even as Martha Stewart serves out her five-month sentence in a West Virginia prison, her namesake Everyday brand has remained a fixture at Kmart (Research), which emerged from bankruptcy protection in May 2003.

Analysts expect the new company, Sears Holdings, will provider shoppers a mall-based, low-cost option to leading retailers Wal-Mart (Research) and Target (Research).