Sycamore, Franchise Group Submit Bids for Kohl’s

Kohl’s Corp. KSS 2.44%

received bids from private equity firm Sycamore Partners and retail holding company Franchise Group Inc.,

FRG -0.69%

According to people familiar with the matter.

Sycamore’s bid valued the Wisconsin department store chain at an average of $50sa, while the Franchise Group put it at around $60, which, some said, equates to about $7 billion or $8 billion. Kohl’s KSS 2.44%

shares closed Thursday at $41.18.

More details on the bid for Kohl’s,

which has been an interesting takeover hobby for months, can’t be learned, including whether anyone else has applied.

Kohl’s board of directors is expected to meet to review the bids in the coming days, the people said. There is no guarantee Kohl’s will accept a deal or that a deal will come together. These people said that if an agreement is reached, it could still be weeks away.

Kohl’s, which said it was exploring strategic options, recently defeated an activist investor’s attempt to overhaul the board. The company’s shares are down 17% so far this year, driven by the pressure of a broader market sell-off.

Shares of Kohl’s were up nearly 8% in after-hours trading on Thursday after The Wall Street Journal reported on the offers.

The Wall Street Journal reported in March that Kohl’s is attracting interest from Sycamore as well as Canada’s Hudson’s Bay, Saks’ parent company. Hudson’s Bay has since decided against bidding, a person familiar with the matter said.

Earlier, Reuters reported that Franchise Group was one of Kohl’s suitors.

Weeks ago, Kohl’s indicated to suitors that they believed the company was worth at least $70 a share, even though market conditions for retailers have worsened since. That, with Target Corp.’s weak earnings report. and Walmart Inc.

hit their stocks. Funding leveraged buybacks has also become more difficult due to market turbulence.

Kohl’s has struggled before the pandemic. Its operating margin fell to 6.1% in 2019 from 11.5% in 2011, while its sales were flat. Then the coronavirus pandemic hit, taking a massive toll on sales and wiping out profits in 2020.

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

Merger activity has slowed in recent weeks as rising interest rates and market volatility make it more expensive and complicated to execute transactions. Financing deals in the notoriously volatile retail industry can be especially challenging as lenders need to be confident about future cash flows.

Kohl’s buyers will likely be looking to monetize their real estate holdings, which has attracted interest from investment firm Oak Street Real Estate Capital LLC, people familiar with the matter said. know.

New York-based Sycamore focuses on retail and consumer investment. In 2020, it agreed to acquire Ann Taylor, LOFT, Lane Bryant and other bankrupt chains of Ascena Retail Group Inc. and owns other companies including Staples Inc., Express and The Limited.

The Franchise Group acquires and manages primarily franchisees, including Vitamin Shoppe, Pet Materials Plus and Buddies Home Furnishings, among others.

Write letter for Suzanne Kapner at Suzanne.Kapner@wsj.com and Cara Lombardo at cara.lombardo@wsj.com

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Appears on 3 June 2022, print edition as ‘Kohl’s to review takeover filings.’

https://www.wsj.com/articles/sycamore-franchise-group-each-submit-bids-for-kohls-11654206211?mod=rss_markets_main Sycamore, Franchise Group Submit Bids for Kohl’s

Edmund DeMarche

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