Kohl's (KSS) shares soared higher Monday as private equity and activist investors line-up competing takeover bids for the struggling department store retailer.
Sycamore Partners, a New York-based private equity group is reportedly offering $65 a share for Kohl's, a price that would value the Menomonee Falls, Wisconsin-based retailer at around $9 billion.
The reported interest comes only days 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.
Late last year, Kohl's faced pressure from activist hedge fund Engine Capital LP, which asked management to consider the sale or the separation of the e-commerce division, arguing in a letter to Kohl's management it could be valued as high as $12.4 billion.
Engine Capita argued that Kohl's "trades at a massive discount to intrinsic value and its strategy has not resonated with the public market", adding that it thinks there are "financial sponsors who will be able to pay a significant premium of 50%, or at least $75 per share".
"Activist plans typically focus on strategies like pulling forward monetization of real estate today, and we do think there’s some merit to Kohl’s embracing a slightly more aggressive real estate strategy to bolster shareholder returns today," said Credit Suisse analyst Michael Binetti. "Further, we think Kohl's lagged peers in 4Q and the timing of further underperformance vs peers in the important holiday period likely bolsters the activist’s pitch that more aggressive strategic measures should be considered.
Kohl's shares were marked 33.65% higher in early trading to change hands at $62.62 each, a move that would value the stock at around $8.7 billion.
Kohl's said digital sales rose 6% from last year over the third quarter, and were up 33% from 2019 levels, with CEO Michelle Gass telling investors on November 18 that digital and brick-and-mortar retail "reinforce each other, together delivering an exceptional customer experience through a seamless omnichannel integration of offerings and conveniences."
Kohl's posted much stronger-than-expected third quarter earnings of $1.85 per share last month, on revenues of $4.3.7 billion, while raising its full-year earnings guidance to between $7.10 to $7.30 per share, amid what Gass called an ongoing effort to "transform Kohl’s into the leading destination for the active and casual lifestyle."
