Kohl’s current leadership secures backing of at least one institutional shareholder

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Investment management firm T. Rowe Price has voiced support for Kohl’s Corp.‘s current board leadership as the proxy fight against activist investor Macellum Capital Management persists.

Reuters first reported late Wednesday that T. Rowe Price released a case study saying it will vote for Kohl’s 13 incumbent board directors over the slate of 10 new directors put forward by Macellum – as part of its campaign to take control of the company.

T. Rowe Price is one of the Menomonee Falls-based retailer’s largest shareholders, owning 6.8 million shares or 5.29% of the company at the end of last year, according to Reuters. BizTimes on Thursday confirmed the news with T. Rowe Price and obtained the case study, which said the firm met with both Kohl’s and Macellum to form its voting decision.

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“We find strong evidence that the incumbent board is committed to choosing the path it believes has the highest likelihood of shareholder value creation. Furthermore, we are confident the board is employing an independent and rigorous process to determine the appropriate path for the company,” according to the case study.

Macellum, with a 5% ownership stake, has been pressuring Kohl’s to improve performance or consider a full sale of the company. Macellum and a group of other activists mounted a similar campaign in 2021, but the two sides reached a settlement that led to three new board members on the Kohl’s board. That outcome is “unlikely” this time around, Michelle Gass, chief executive officer at Kohl’s, said recently.

Meanwhile, Kohl’s is vetting potential suitors for a potential sale, having retained Goldman Sachs to engage with bidders. Gass recently said the company has engaged with more than 25 parties since January. However, Macellem has questioned whether Kohl’s and its board are committed to conducting a robust sale process.

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Macellum’s latest swipe at Kohl’s management was a 168-page presentation released Wednesday that again accused the board of flouting an ongoing sale review process, elaborated on the company’s financial decline compared to industry peers, highlighted customer-facing shortcomings and outlined a new operating plan to grow sales and stock value.

Kohl’s, meanwhile, has continued to rebuke Macellum’s claims, tout the strength of its current leadership, and double down on it own long-term turnaround strategy – which these days includes engaging with potential suitors.

Shareholders will have a chance to vote for either the Macellum or Kohl’s nominees at the company’s annual meeting, taking place virtually on May 11.

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T. Rowe’s decision to back Kohl’s directors is seen as a setback for Macellum, who would need the full support of Kohl’s institutional investors in order to win, said David Swartz, an analyst at Morningstar Research Services.

“If all the institutional owners vote for Macellum’s group, then they only need a minority of the small shareholders to vote with them to win,” Swartz said in an email Wednesday, prior to the Reuters news.

Other institutional-investor owners of Kohl’s include The Vanguard Group with a 10.8% ownership stake, BlackRock Inc. with 10.4% and JPMorgan Chase & Co. with 5.8%, according to Kohl’s 2022 proxy statement.

All three firms declined to comment Thursday on how they intended to vote in Kohl’s upcoming board election.

In its case study, T. Rowe said Kohl’s board is faced with unusual circumstances balancing a proxy war and a potential sale review.

“Each of these is a time-consuming and distracting endeavor at a time when it’s critical that the company continue to execute its value-creation strategy,” the firm wrote. “In our view, our final vote decision reflects the path we believe is most constructive, enabling the company to focus on the decisions most likely to benefit shareholders over time.”

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