The retailer is seeking approval from bankruptcy court to sell its Internet service provider business to United Online for $8.4 million.
United Online, which owns the NetZero and Juno Internet services, said last month that it had made a bid for Kmart's BlueLight Internet service provider (ISP) business.
The BlueLight service has 165,000 subscribers. United Online said that there should be no service interruption for subscribers and that e-mail addresses will remain the same. A bankruptcy judge is expected to hear the request at the end of this month.
United Online won a competitive bidding process to get the assets, but the companies did not reveal the other bidders.
Kmart, which filed for bankruptcy in January, launched the ISP business as a spinoff in 1999, offering free Internet access. BlueLight dropped the free service in February 2001 and was reacquired by Kmart in July 2001.
The sale of the ISP assets is not expected to have an impact on Kmart's online shopping site.