Kohl’s Entertaining Two Takeover Bids

Kohl's exterior feature

Amid activist pressure, struggling retailer Kohl’s has been approached by two private equity firms with buyout offers, the company has acknowledged based on media reports in CNBC and the Associated Press, valuing its stock at up to a 39% premium to Friday’s close.

Sycamore has offered at least $65 per share for Kohl’s, which gets to the 39% premium based on Friday’s closing price of $46.84, sources told CNBC. Two days earlier, Acacia Research offered a $64 per share buyout.

Sources also said either private equity firm would work through Oak Street Real Estate Capital to sell off the company’s real estate assets to raise money, an approach the retailer has spurned in the past.

A Kohl’s spokesperson told CNBC its board “will determine the course of action that it believes is in the best interests of the company and its shareholders.” The company also said its performance has been improving, citing things like Sephora’s store-within-a-store and financial results. For the second quarter of 2021, Kohl’s posted a 46.8% gain in revenue and a gross margin that improved from 33.1% to 42.5% vs. the prior year, although the GAAP net loss ballooned from $47 million to $387 million.

Last April, Kohl’s agreed to add two board members put forward by a group of activist investors led by 5% stakeholder Macellum, which has an interest in taking control of the company. Macellum has also accused the Kohl’s board of rebuffing credible takeover offers, thus violating its fiduciary responsibility to shareholders, according to Business Insider.

Many industry observers questioned Kohl’s decision a few years ago to partner with Amazon and accept returns of Amazon purchases in its retail stores, considering its impact on traditional retail. The program, premised on building sagging foot traffic among other things, was piloted in the fall of 2018, and rolled out nationwide six months later.

“We are thrilled to bring Amazon Returns at Kohl’s to all of our stores across the country,” said CEO Michelle Gass, who initiated the program shortly after being moved up from chief merchandising officer. “Amazon and Kohl’s have a shared passion in providing outstanding customer service, and this unique partnership combines Kohl’s strong nationwide store footprint and omnichannel capabilities with Amazon’s reach and customer loyalty.”

Kohl’s competitor Macy’s is facing its own pressure from activist investors as it weighs a retail/ecommerce split along the lines of a recent move by Saks that created a new digital-only company.