Merge two spreadsheets

I am trying to merge the data from two speadsheets to get a single sheet that displays all data. The sheets have some matching data (ITEM & LOC) and if they match, should be placed on the same line, but some lines will not correspond and the lines should be left blank..

In the following image, I need to achieve Sheet 3 out of Sheet 1 and Sheet 2. You can see the details in the attached Worksheet.

I am using Excel 2003.

Can anyone offer any suggestions? It would be greatly appreciated.