Kohl’s sale talks could last for weeks, possibly longer
The tender process draws for Kohl’s Looks like it won’t end anytime soon.
It could take weeks, if not longer, for an agreement to come together, a person familiar with the situation told CNBC. The dialogue was especially protracted because it was difficult to secure financing in uncertain market conditions, The person adds that the deal price per share is likely at this point to be in the mid-$50s.
Kohl’s shares closed up slightly at $41.48 Friday afternoon, giving the company a market value of about $5.33 billion. Shares were trading as low as $34.64 on May 24.
“Anyone buying the business is going to need time,” said the person, who requested anonymity because the discussions are private and ongoing. “No one is prepared to sign a deal right now.”
The Wall Street Journal reported on Thursday night that private equity chain Sycamore Partners and retail group Franchise Group have both submitted bids to acquire the out-of-mall department store chain. The magazine said it is not clear whether any other parties are interested at this time. About two weeks agoKohl’s CEO Michelle Gass said final and fully funded bids from buyers can be expected in the coming weeks.
This story at Kohl’s has been out for more than half a year, which trading experts describe as an unusual period.
Out-of-mall department store chain is the first chain of stores In early December 2021 by New York-based hedge fund Engine Capital to consider selling, or another alternative to increase its stock price. At the time, Kohl’s stock was trading around $48.45.
In mid-January, the activist hedge fund Macellum Advisors then pressured Kohl’s to consider a sale. Macellum’s chief executive officer, Jonathan Duskin, said executives had “seriously mismanaged” the business. He also said Kohl’s still has a lot of potential to explore with its real estate.
That should be enough for the retailer to get serious about its options. In early February, Kohl’s said it had invited bankers at Goldman Sachs and PJT Partners to help the retail sector deliver and also to do some outreach.
Spokespersons for Kohl’s and Sycamore declined to comment. Franchise Group, Goldman Sachs and PJT Partners did not respond to CNBC’s request for comment.
Kohl also in that month thinks an offer from Acacia Research backed by Starboard, at $64 a share, is too low. That offer valued Kohl’s business at about $9 billion.
According to Brian Quinn, a professor at Boston College Law School who specializes in mergers and acquisitions, Kohl probably wished they had taken the offer.
“The stock price that they thought internally they could achieve, doesn’t seem reasonable anymore,” he said. “My guess is that if you told the board [at Kohl’s] What will happen in the market in April and May, they will sell the company. “
“But the thing is, nobody knows what the future will bring,” he added.
A cool start to spring coupled with consumer cravings for discretionary items amid rising inflation based on Kohl’s financial results for the three-month period ended April 30. Revenue fell to $3.72 billion from $3.89 billion in 2021. Kohl’s also cut its profit and revenue forecasts for the full fiscal year.
Quinn said the bleak outlook could stagger potential buyers.
“It was as if you were going to buy a house,” he said. “And when you’re talking to the seller, or the seller’s agent, the roof will collapse. This is a very dynamic process in terms of negotiation.”
At one point, Simon Property Group, the largest mall owner in the United States, is reportedly among potential bidders for Kohl’s. But a person familiar with the situation told CNBC last month, following Kohl’s dismal quarterly report, that Simon did not prepare a bid.
Quinn says Kohl’s board of directors will likely balk at the lower bids and ultimately won’t pursue a sale of the company. “And they may not sell the company because of the current state of the market,” he added.
The stock market slipped, Supply chain headaches, rising interest rates and the war in Ukraine have combined with limited dealmaking and IPOs in the retail sector so far this year.
Experts say it’s unclear when that could rise again. The consensus seems to be after Labor Day. For Kohl’s, the best course of action might be to keep it that way for as long as possible.
Gordon Haskett analyst Don Bilson wrote in a research note: “Kohl’s may have received two bids, but didn’t like either and they were unwilling to say the same to the very volatile market. instability”. “That, as much as anything, explains why it might be bidding extra time.”