Sycamore and Franchise Group submit offers for Kohl’s

Sycamore and Franchise Group submit offers for Kohl’s

Sycamore’s offer values ​​Kohl’s at about $50 a share; Franchise Group’s offer values ​​Kohl’s at around $60 a share

Kohls Corp. received takeover bids from private equity firm Sycamore Partners and holding company Franchise Group Inc., according to people familiar with the matter.

Sycamore’s offer values ​​the Wisconsin department store chain at around $50 a share, while Franchise Group offered around $60, some people said, which equates to around $7 billion or $8 billion.

Kohl’s stock closed Thursday at $41.18.

Other details about Kohl’s bids, which have been generating interest in the takeover for months, could not be known, including whether anyone else had submitted one.

Kohl’s board of directors is expected to meet to consider the offers in the coming days, the sources said.

There is no guarantee that Kohl’s will be receptive to an agreement or that one will meet. If a deal were to be reached, it would likely take several more weeks, they said.

Kohl’s, which said it is exploring strategic options, recently defeated an activist investor’s attempt to reshuffle its board.

The Wall Street Journal reported in March that Kohl’s was attracting interest from Sycamore as well as Hudson’s Bay in Canada, a parent of Saks.

Hudson’s Bay has since decided not to bid, a person familiar with the matter said.

Reuters previously reported that Franchise Group was among the suitors for Kohl’s.

A few weeks ago, Kohl’s told suitors he believed the company was worth at least $70 a share, although market conditions for retailers have since deteriorated, with weak earnings reports from Target. Corp. and Walmart Inc. which received their shares.

Financing leveraged buyouts has also become more difficult due to market turbulence.

Kohl was struggling before the pandemic. Its operating margin fell to 6.1% in 2019 from 11.5% in 2011, while its sales changed little. Then the coronavirus pandemic hit, taking a heavy toll on sales and wiping out profits in 2020.

Sales and profits rebounded in 2021, but in January 2022 the retailer’s stock was worth less than two decades ago.

Merger activity has slowed in recent weeks as rising interest rates and market volatility make deals more expensive and difficult.

Financing arrangements in the notoriously volatile retail industry can be particularly difficult as lenders need to be confident about future cash flows.

Kohl’s buyers would likely seek to monetize his real estate holdings, which have attracted interest from investment firm Oak Street Real Estate Capital LLC, people familiar with the matter said.

Sycamore, based in New York, focuses on consumer and retail investments. In 2020, he agreed to buy Ann Taylor, LOFT, Lane Bryant and other chains from the bankruptcy of Ascena Retail Group Inc. and owns other companies including Staples Inc., Express and The Limited.

Franchise Group primarily acquires and manages franchise companies, including Vitamin Shoppe, Pet Supplies Plus, and Buddies Home Furnishings, among other brands.