Saks owner could enter Kohl bidding process as shareholder pressure continues
Last update on March 18, 2022 at 11:48 a.m.
In January, Kohl’s received unsolicited offers of Acacia Research Corp. and Sycamore Partners to acquire the company for $64 or $65 per share. The company rejected these offers.
Kohl’s says it has engaged Goldman Sachs to discuss potential deals with interested parties. In addition to potential buyers, Goldman has reached out to companies 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 who entered into non-disclosure agreements, according to Kohl’s filings.
The Axios report says Sycamore is considering at least one more bid.
Asked to comment on Axios’ report, a spokesperson for Kohl noted that the company had previously disclosed “strong and ongoing” engagement with potential bidders.
“The board will evaluate potential offers against a compelling stand-alone plan and choose the path it believes will maximize shareholder value,” the spokesperson said.
The autonomous path has also come under intense scrutiny over the past week. The company held an Investor Day on March 7 detail plans open 100 smaller-format stores and grow its partnership with Sephora to $2 billion. Kohl’s also said its earnings per share would increase by a mid-to-high figure and authorized a $3 billion share buyback program.
Kohl’s stock, which had risen from $40 to over $63 when the offers were announced in January, fell from the high range to the low $50 range after the day’s investors. It jumped into the $60s again after the Axios report.
But Engine Capital LP, which owns around 1% of Kohl’s shares, expressed concern in a letter to the company’s board of directors Wednesday on the financial outlook for the day of investors.
The company had suggested in a December letter that Kohl either spin off its e-commerce business or consider a sale to a financial sponsor it said could be worth $75 a share.
“We – and apparently much 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 expectations around this event, including our direct interactions. Therefore, we expected to hear something so compelling that it would justify your reckless public opposition to recent $64 offers. per share and $65 per share from two credible parties.
Engine Capital said the earnings-per-share guidance combined with the permitted share reallocation suggested the company’s earnings would decline or stagnate “at best.”
Kohl’s spokesperson said Engine Capital’s statement was “full of inaccuracies and misleading statements.”
Described as “a value-oriented special situations fund”, Engine Capital urged Kohl’s board to re-evaluate its view of the company’s value and asked shareholders to make “the ultimate assessment of a Kohl’s sale”.
“The board and management have overseen so much value destruction over the years that we believe it is emotionally and financially conflicting to make this assessment,” the letter states. “The best offer, whether $65 per share or hopefully higher, should be negotiated and put to shareholders for a vote so that the true owners of the company can decide whether the offer is appropriate. .”