Kohl’s Corp mulls US$8-bn buyout offer from Franchise Group

Highlights:

• Kohl’s Corp (NYSE:KSS) is in exclusive talks with Franchise Group Inc. for an US$8 billion buyout deal.
• Franchise Group plans to buy Kohl’s for US$60 per share.
• Kohl’s shares soared to US$64.38 in late January, hitting a 52-week high.

Kohl’s Corp (NYSE:KSS) has been holding exclusive talks with Franchise Group Inc. for a buyout deal worth US$8 billion.

Both the companies issued separate statements on Monday about entering a three-week discussion to deliberate on the Franchise Group’s offer to buy Kohl’s for US$60 per share.

The exclusivity period will be utilized by the Franchise Group and its funding partners to sort out financing arrangements after completing due diligence.

In a statement, the Franchise Group said it is likely to contribute about US$1 billion and the remaining amount to be raised through debt facilities.

Kohl’s real estate assets will be the deciding factor for most of the financing, said Franchise Group, the Delaware, Ohio-based company.

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Kohl’s shares jumped on news of takeover bid

The Wisconsin-based company saw its shares tumble 15% this year. However, it rose close to US$48 after the final bell on Monday after the news. Earlier, they had finished 1.5% up to US$42.12, sending the market value of the company to US$5.4 billion.

However, it is not the first time Kohl’s has entered into a take-over discussion. In February, the company announced rejecting takeover offers because they undervalued it.

According to a Bloomberg report, Sycamore Partners and a suitor backed by hedge fund Starboard Value LP had earlier initiated discussions with Kohl’s to work out a potential buyout deal. It did not become clear the amount Sycamore wanted to invest in Kohl’s.

But the Starboard-backed suitor was willing to pay US$9 billion or US$64 per share for the deal. Last month, there was a bid to unsettle Kohl’s board by activist investor Macellum Capital Management, which investors thwarted.

Bottom line:

Kohl’s shares soared to US$64.38 in late January, hitting a 52-week high. The company’s sales for the quarter ended April 30 slumped to US$3.72 billion compared to US$3.89 billion in 2021. Investors were disappointed after toning down its profit and revenue forecast for the fiscal year.