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Kohl’s Corp. (KSS) – Get Kohl’s Corporation Report shares surged higher Tuesday after the struggling retailer said it’s in exclusive talks with the Franchise Group (FRG) – Get Franchise Group Inc. Report over a possible $8 billion takeover.
Franchise Group said it’s prepared to pay $60 a share for Kohl’s, and has entered a three-week exclusive discussion window that Kohl’s said would allow it to “FRG and its financing partners to finalize due diligence and financing arrangements and for the parties to complete the negotiation of binding documentation.”
“The transaction remains subject to approvals of the Boards of Directors of both companies. There can be no assurances that any agreement will be reached or that a transaction will be agreed or completed on the terms set forth above or otherwise,” Kohl’s said. “The Company will have no further comment until an agreement is reached or the discussions are terminated.”
“Kohl’s Board of Directors remains focused on selecting the path that maximizes value for all Kohl’s shareholders,” the retailer added.
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Kohl’s shares were marked 13.25% higher in pre-market trading to indicate an opening bell price of $47.70 each.
Kohl’s has also attracted interest from a host of private equity firms and retail asset investors, including Sycamore Partners, Simon Property Group SPG and Brookfield Asset Management.
However, a spate of disappointing first quarter earnings from big names such as Target (TGT) – Get Target Corporation Report and Walmart (WMT) – Get Walmart Inc. Report, alongside muted near-term outlooks from casual apparel specialists, has pared some of that interest and reduced the level of competition for brand-operator Franchise Group, which owns stores including The Vitamin Shoppe and Buddy’s Home Furnishings.
Earlier this year, Sycamore Partners, a New York-based private equity group was ready to offer $65 a share for Kohl’s, a price that would value the Menomonee Falls, Wisconsin-based retailer at around $9 billion.
The move came just days after after several media outlets said activists investor-backed Acacia Research offered $64 a share for Kohl’s following public criticism of the group’s management from activist investors Macellum Advisors, which owns 5% of the retailer, and the urging of a whole-enterprise sale after what it called a ‘lost year’ for the department store icon.
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