Kohl’s Receives $9 Billion Offer Backed by Activist Investor

January 22, 2022
Business

Kohl’s, based in Menomonee Falls, Wis., and founded in 1962, is a department store focused on casual wear, home wares and sporting goods. Unlike other retailers like Nordstrom, Kohl’s stores are frequently found in smaller shopping centers, rather than malls. That has made its real estate more valuable as malls have fallen on hard times.

A key question will be whether the Starboard consortium will secure the necessary funds to finance the bid, particularly given challenges posed by past leveraged buyouts of retailers, like Toys “R” Us, Payless and Neiman Marcus. Those deals saddled the retailers with debt, leaving them unable to make the necessary investments as e-commerce transformed the retail landscape. All three were eventually unable to make their loan payments and filed for bankruptcy. Both Neiman Marcus and Payless emerged from bankruptcy, while Toys “R” Us ultimately liquidated.

Shares of Kohl’s have risen less than 4 percent over the past year, giving it a market capitalization of around $6.5 billion. The offer, first reported by The Wall Street Journal, would value the retailer at $64 a share, 37 percent premium to its closing price of $46.84 on Friday.

Acacia Research Corporation, which is leading the bid, has been backed by Starboard since 2019. Starboard has helped Acacia raise a “significant” amount of equity capital to fund its offer, one of the people familiar with the discussions said. Acacia has also received a letter of confidence from a bank, this person said, stating that the bank believes it can help assemble part of the debt necessary for the transaction. Acacia is also in talks with a real estate firm that would sell off part of Kohl’s real estate to help fund the bid, this person said.

Both people who spoke about the matter requested anonymity because the offer is confidential. A spokeswoman for Kohl’s did not immediately respond to a request for comment.

Article source: https://www.nytimes.com/2022/01/22/business/dealbook/kohls-sale-starboard-value.html