Kohl’s Corp. Taking a Closer Look at Bids
Kohl’s Corp. is taking a closer look at bids to take over the company, raising the possibility of a deal in the near future.
The $19.43 billion retailer on Monday said it is engaged in a “robust” review of certain bids to acquire the company and is giving the bidders an opportunity to refine their takeover proposals.
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At the same time, Kohl’s characterized the bids received as “non-binding and without committed financing.”
Kohl’s said in a statement that Goldman Sachs has been authorized to “coordinate with select bidders who have submitted indications of interest to assist with further due diligence so that they have the opportunity to refine and improve their proposals and include committed financing and binding documentation.”
Kohl’s did not name the bidders, but last week, the Hudson’s Bay Co., operator of Saks Fifth Avenue, Saks Off 5th and The Bay in Canada, made a bid. Sycamore Partners, a private equity firm that has Belk, Loft, Express, Hot Topic, Ann Taylor and other retailers in its portfolio, as well as Leonard Green & Partners, a private equity firm, and Starboard Value’s Acacia Research Corp. are also said to be bidding for Kohl’s. Bids have been in the mid-to-high $60 range. Kohl’s stock price closed at $62.05, down $0.38 or 0.61 percent, on the NYSE Monday.
In February, Kohl’s rejected a couple of unsolicited bids in the $64 to $65 per share range, and could now be seeking to entertain bids around $70.
Sources have told WWD that the due date for preliminary bids was March 16.
The Kohl’s finance committee of the board is working with Goldman Sachs on reviewing takeover offers. The finance committee is comprised exclusively of independent directors.
Also on Monday, Kohl’s issued proxy materials and a letter to shareholders urging them to reject activist stakeholder Macellum Advisors’ proposal for taking over the Kohl’s board — and to stick with the current board.
Macellum has proposed a slate of 10 nominees to the retailer’s board and has been vociferous in its criticisms of Kohl’s management, contending it’s been unable to create sufficient value for shareholders and that the company is underperforming its peers. Macellum has been pushing Kohl’s to sell the business or possibly reengineer it by splitting the dot-com and store operations into separate companies.
Kohl’s shareholders will vote on the board at its annual meeting of shareholders, which is scheduled for May 11. Kohl’s shareholders of record as of the close of business on March 7 will be entitled to vote at the annual meeting.
Kohl’s, arguing against Macellum’s contentions, said Monday that its board and management team are creating significant value. “Since the announcement of our new strategy in October 2020, we have made substantial progress in transforming our business and positioning the company for long-term success. Total shareholder returns over this time frame have been 146 percent through Jan. 21, 2022, significantly outperforming the SPDR S&P Retail ETF and the S&P 500,” the company said in its letter to shareholders.
Kohl’s new strategy centers on establishing itself as a destination for active and casual apparel and accessories for men, women and kids; rolling out Sephora shops inside Kohl’s stores as well as selling Sephora on kohls.com; upgrading its women’s offerings; adding several high-profile brands such as Calvin Klein, Lands’ End and Tommy Hilfiger, and growing digital sales from $6 billion to $8 billion.
“To ensure we are maximizing shareholder value, your board is reviewing alternatives through an intentional and ongoing dialogue with potential bidders,” Kohl’s said in its letter. “This process is robust and will be measured against the value creation potential of our compelling stand-alone plan. Regardless of the outcome of this process, we are excited about the many opportunities ahead for Kohl’s.”
The company also said its board members have “industry-leading experience in areas critical to our business, including e-commerce, retail, apparel, technology, as well as M&A expertise, ensuring that our approach with potential bidders yields optimal results.
“Unfortunately, one of our shareholders, Macellum Advisors, is seeking to take control of your board with a slate of less qualified nominees. Kohl’s is committed to engaging constructively with all our shareholders. However, we believe Macellum’s efforts to take control of Kohl’s are unjustified and unwarranted and highly concerning given Macellum’s intentions to engineer short-term financial actions that could damage the long-term future of the company. We urge you to discard any white proxy card you may receive from Macellum.”
Instead, Kohl’s said it “strongly” recommends voting the blue proxy card, which is being sent to shareholders, in favor of the 13 members of Kohl’s existing board. They are Michael Bender, Thomas Kingsbury, Peter Boneparth, Robbin Mitchell, Yael Cosset, Jonas Pricing, Christine Day, John E. Schlifske, H. Charles Floyd, Adrianne Shapira, Stephanie A. Streeter, Margaret Jenkins, Frank Sica and Michelle Gass, the chief executive officer of Kohl’s.
Kohl’s said last year it delivered record adjusted earnings per share of $7.33, eclipsing the previous record of $5.60 in 2018, and that it achieved an operating margin of 8.6 percent, two years ahead of it 2023 target.
The Menomonee Falls, Wisc.-based retailer opened its first 200 Sephora at Kohl’s shops last year and at those locations it is seeing mid-single-digit sales lifts, with 25 percent of customers new to Kohl’s. Another 400 Sephora at Kohl’s shops are expected to open in 2022, and Sephora will be in at least 850 Kohl’s stores in 2023.
Kohl’s also said 99 percent of its stores are four-wall cash flow positive, and that 100 new stores will open in the next four years, adding about $500 million in sales.
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