Kohl’s may have found an $8 billion buyer

Kohl’s Corp. is entering exclusive talks regarding a sale with one of its suitors.

The department store company has entered into exclusive negotiations with Franchise Group Inc. (FRG), a holding company whose retail portfolio includes The Vitamin Shoppe, Pet Supplies Plus and rent-to-own chain Buddy’s Home Furnishings, for a period of three weeks. Franchise Group is proposing to buy Kohl's for $60 per share, which would value the business at approximately $8 billion. 

The three-week exclusive period will allow Franchise Group and its financing partners to finalize due diligence and financing arrangements. It will allow the parties to complete the negotiation of binding documentation.

In its recent first quarter fiscal 2022 earnings report, Kohl’s provided an update on its exploration of a potential sale, following its recent successful effort to fend off activist investor Macellum Capital Management’s bid to take control of its board.

“Regarding our review of strategic alternatives, we continue to engage with multiple interested parties,” Kohl’s CEO Michelle Gass said at the time. “We have formally communicated the specific procedures for the submission of actionable bids due in the coming weeks. We continue with our detailed diligence phase and are pleased with the number of parties who recognize the value of our business and plan.”

The Kohl’s board said it has designated its finance committee to lead an ongoing review of expressions of interest in an acquisition, and has engaged Goldman Sachs to explore strategic alternatives. As of May 2022, the retailer says over 25 parties had discussed possible acquisitions, with multiple bidders invited to a data room containing over 550,000 pages across over 55,000 documents, as well as meetings with management.

Preliminary, non-binding purchase proposals had been received in May, but Kohl’s said further diligence was ongoing and the board had requested fully-financed final bids to be submitted in the coming weeks.

Kohl’s sales dip in Q1
During the quarter ended April 30, 2022, Kohl’s Corp. followed positive low-single-digit same-store sales through late March with what it termed a “considerable” weakening of sales in April. Net sales and same-store sales declined 5.2% for the quarter compared to the same quarter a year earlier, while total revenue fell 4.4% to $3.71 billion from $3.89 billion.

Kohl’s cited external “macro headwinds,” including the end of government stimulus payments and inflation, in its quarterly results missing expectations. The company updated its full-year fiscal 2022 guidance to include predictions of net sales in the range of 0% to 1% higher as compared to the prior year, as well as operating margin in the range of 7.0% to 7.2% and earnings per share (EPS) in the range of $6.45 to $6.85, excluding any non-recurring charges.

Other companies which have reportedly bid for Kohl’s include Hudson's Bay, Sycamore Partners, Acacia Research, Starboard Value, and shopping center giants Simon Property and Brookfield Asset Management.

[Read More: Report: Simon, Brookfield offer to buy Kohl’s for $8.6 billion]

Headquartered in Menomonee Falls, Wis., Kohl’s Corp. operates more than 1,100 stores in 49 states, as well as an e-commerce site and consumer app.