Canadian department store Hudson Bay, the parent company of Saks Fifth Avenue, is reportedly considering a bid for Menomonee Falls-based Kohl’s Corp., according to a report from Axios.
In January, Kohl’s received unsolicited offers from Acacia Research Corp. and Sycamore Partners to acquire the company for $64 or $65 per share. The company rejected those bids.
Kohl’s says it did engage Goldman Sachs to discuss potential deals with interested parties. In addition to potential buyers, Goldman reached out to firms including financial sponsors, strategic buyers and real estate focused investors about potential deals. In total, more than 20 parties were engaged and a subset of those entered into confidentiality agreements, according to Kohl’s securities filings.
The Axios report indicated Sycamore is at least considering another bid.
Asked to comment on the Axios report, a Kohl’s spokesperson noted the company had previously disclosed “robust and ongoing” engagement with potential bidders.
“The board will measure potential bids against a compelling standalone plan and choose the path that it believes maximizes shareholder value,” the spokesperson said.
The standalone path has also come under scrutiny over the past week. The company held an investor day on March 7 detailing plans to open 100 smaller-format stores and grow its partnership with Sephora to $2 billion. Kohl’s also said its earnings per share would grow mid-to-high single digits and authorized a $3 billion share repurchase program.
Kohl’s stock, which had jumped from the high $40s to more than $63 when the bids were announced in January, fell from the high to the low $50 range following the investor day. It again jumped into the $60s following the Axios report.
But Engine Capital LP, which owns about 1% of Kohl’s stock, expressed concern in a letter to the company’s board on Wednesday about the financial outlook from the investor day.
The firm had suggested in a December letter that Kohl’s either spin off its ecommerce business or explore a sale to a financial sponsor it estimated could be worth $75 per share.
“We – and apparently a large portion of the market – are extremely disappointed with the financial guidance presented at the company’s recent analyst day,” the letter said. “Kohl’s had spent months building up expectations around this event, including during our direct interactions. Therefore, we were expecting to hear something so compelling that it would justify your rash public opposition to the recent $64 per share and $65 per share offers from two credible parties.”
Engine Capital said the earnings per share guidance combined with authorized share repurpose suggested the company’s earnings would be going down or flat “in a best-case scenario.”
The Kohl’s spokesperson said the Engine Capital statement was “filled with inaccuracies and misleading statements.”
Described as “a value-oriented special situations fund,” Engine Capital urged the Kohl’s board to reassess its view of the company’s value and asked that shareholders make “the ultimate assessment about a sale of Kohl’s.”
“The board and management have overseen so much value destruction over the years that we believe it is emotionally and financially conflicted to make that assessment,” the letter said. “The best offer, whether it be $65 per share or hopefully higher, should be negotiated and put in front of shareholders for a vote so that the company’s true owners can decide whether the offer is appropriate.”
