Kohl’s says takeover bids undervalue its business, launches ‘poison pill’

ByDonald L. Leech

Feb 4, 2022

The Kohl’s logo is displayed outside a Kohl’s store on January 24, 2022 in San Rafael, California.

Justin Sullivan | Getty Images

Kohl’s said on Friday it believes recent takeover offers undervalue its business in light of future growth and cash flow generation, following a review by independent financial advisers.

The department store also said it adopted a shareholder rights plan, otherwise known as the “poison pill”, to avoid a hostile takeover. The plan is effective immediately and expires in February 2023.

Shares of Kohl rose more than 1% in early trading. The stock has surged in recent weeks on news of potential suitors, but remains below a 52-week high of $64.80 hit last May.

“The valuations shown in the current expressions of interest it has received do not adequately reflect the value of the business in light of its future growth and cash flow generation,” Kohl’s said in a statement. communicated.

Last month, Acacia Research, backed by activist investment firm Starboard Value, offered to pay $64 a share for Kohl’s, valuing it at around $9 billion. Private equity firm Sycamore Partners was also planning an offer of $65 per share, people familiar with the offer told CNBC.

Activist hedge fund Macellum Advisors, meanwhile, has asked Kohl’s to consider selling itself and wants at least a seat on the retailer’s board.

Cowen & Co. analyst Oliver Chen previously said the $64 and $65 per share bids were not enough, especially given the underlying value of Kohl’s real estate. Chen said last month he estimated Kohl’s stores could sell for between $10 million and $14 million each, depending on location and traffic. However, Kohl’s resisted any further sale-leaseback transactions.

Chen said there’s a 30-40% chance a deal will be done for $75 per share or more. However, he also said there was a 40% chance there would be no deal.

Kohl’s said Friday that its board of directors is committed to maximizing long-term shareholder value and will review and pursue opportunities that Kohl’s says “will credibly lead to value consistent with its future performance and opportunities.”

He added that he has an appointed finance committee, made up exclusively of independent directors, to conduct an ongoing review of any future expressions of interest in the company. He is also working with bankers from Goldman Sachs and PJT Partners on these efforts.

Kohl’s said it will provide more updates on its strategy at an Investor Day scheduled for March 7.

Shares of Kohl are up nearly 19% this year, as of Thursday’s market close. This brings its market capitalization to $8.2 billion.

Read Kohl’s full press release here.