Kohl’s has confirmed reports that it is in discussion with a number of parties interested in acquiring its business, saying in a letter to shareholders that it was engaging in a “intentional and ongoing dialog with potential bidders.”
While the Kohl’s Board did not identify which companies it was currently in discussion with, Hudson’s Bay Company (HBC) and private-equity firm Sycamore Partners (which has stakes in a number of retailers, including Staples, Express and Belk), are among the companies reported to be making overtures.
“This process is robust and will be measured against the value creation potential of our compelling standalone plan,” read the shareholder letter. “Regardless of the outcome of this process, we are excited about the many opportunities ahead for Kohl’s.”
After rejecting a takeover offer from Sycamore Partners and Acacia Research in February on the grounds that the bid undervalued the company, Kohl’s engaged Goldman Sachs to field additional bids for its business. “We have had engagement with roughly 20 parties — we’ve had some unsolicited bids and we’ve also done some outreach to make sure that we are doing our job as a board to evaluate these options against a very strong plan,” said Kohl’s CEO Michelle Gass in an interview earlier this month on Bloomberg TV.
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At the same time, Kohl’s also adopted a poison pill to defend against a hostile takeover from activist investor Macellum Advisors, which along with a group of other investors has been pushing for a shakeup of the Kohl’s Board. “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,” reads the shareholder letter.
Among the actions the investors are advocating include the spinoff of Kohl’s ecommerce business, a strategy that rumored bidder HBC has employed with a number of its businesses, including Hudson’s Bay, Saks Fifth Avenue and Saks OFF 5TH.
Kohl’s defended its existing Board in the letter, pointing to the fact that it had been “recently refreshed and has industry-leading experience in areas critical to our business, including ecommerce, retail, apparel, technology, as well as M&A expertise, ensuring that our approach with potential bidders yields optimal results.
“Your Board and management team are creating significant value,” continued the letter. “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 timeframe have been 146% through January 21, 2022, significantly outperforming the SPDR S&P Retail ETF and the S&P 500. Our growth strategy will allow us to drive sustainable and profitable growth and continue to return substantial capital to shareholders.”
