Kohl’s turns down $9 billion purchase offer, says it will pursue better opportunities

Activist investor to move forward with nominating slate of directors

A Kohl's storefront featuring its new Sephora shop-in-shops. Credit: Kohl's Corp.

Last updated on February 7th, 2022 at 11:58 am

Menomonee Falls-based Kohl’s Corp. on Friday announced it passed up recent takeover bids but will continue to vet other offers.

The retailer has received unsolicited offers reportedly from two private equity investors: Acacia Research Corp. (a group backed by activist investor firm Starboard Value) for $64 a share or about $9 billon, and Sycamore Partners, for $65 a share. Kohl’s stock opened Friday at $57.75 and rose about 3% in morning trading.

Still, Kohl’s board is not impressed by what its suitors have offered. In a statement released Friday, the company said the bids “do not adequately reflect the company’s value in light of its future growth and cash flow generation.” The decision was based on a review by independent financial advisors.

“The board is committed to maximizing the long-term value of the company and will review and pursue opportunities that it believes would credibly lead to value consistent with its performance and future opportunities,” sad Kohl’s.

New York hedge fund and activist investor Macellum Capital Management, which owns a 5% stake in Kohl’s, has urged the company to evaluate a full sale through an open review process. Last week, Macellum asked for a seat on the retailer’s board, under the premise that its representative would lead a special committee of independent directors to oversee the review, retain advisors, and solicit proposals from potential suitors. That so far has not happened.

In response to Kohl’s announcement Friday, Macellum managing partner Jonathan Duskin said the firm is “disappointed and shocked by Kohl’s hasty rejection…” and it will do everything in its power to stop the board from derailing a “normal-course” sale review process. As previously threatened, Macellum plans in the coming days to nominate a slate of independent board candidates for election at the 2022 annual meeting, according to a news release.

Kohl’s has tapped its Finance Committee to lead the ongoing review of further offers and recruited financial advisors PJT Partners and Goldman Sachs, which will engage with interested parties.

Also on Friday, Kohl’s announced it has adopted a limited-duration shareholder rights plan, effective immediately with a scheduled expiration of Feb. 2, 2023.

Known in the investor world as a “poison pill,” a shareholder rights plan is typically implemented to avoid an unwanted takeover by a larger firm. “Such plans allows existing shareholders the right to purchase additional shares at a discount, effectively diluting the ownership interest of any new, hostile party,” according to Investopedia.

Kohl’s said the move ensures that the board can conduct an orderly review of purchase offers and engage with suitors. It does not prevent the board from “considering an offer that recognizes the value of the company.”

“We have a high degree of confidence in Kohl’s transformational strategy, and we expect that its continued execution will result in significant value creation,” said Frank Sica, Kohl’s chairman. “The board is committed to acting in the best interest of shareholders and will continue to closely evaluate any opportunities to create value.”

The company plans to give an update on its turnaround plans at its March 7 investor day. Kohl’s is to release its fourth quarter 2021 earnings on March 1.

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Maredithe Meyer covers restaurants, retail, tourism, and sports and entertainment. She joined BizTimes in 2015, previously as an intern reporter. She earned a degree in journalism from Marquette University in 2017. When she's not on the job, Maredithe coaches field hockey and loves exploring her favorite city on earth, Milwaukee.

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