Department store retail chain Kohl's has received a $9 billion offer to go private from a consortium headed by Acacia Research Corporation and backed by activist hedge fund Starboard Value. The offer comes as the retailer is struggling to make a profit amid the ongoing pandemic and supply chain disruptions.
Like other brick-and-mortar retailers, Kohl's has been struggling to compete with online competitors such as Amazon and eBay amid the pandemic. The decrease in walk-in customers has also put a dent in the company's share prices, which have been declining over the past several years.
Kohl's is already under pressure to increase the value of its stock. In a letter sent last Tuesday, activist investor Macellum Advisors, which owns a 5% investment in Kohl's, encouraged the retailer to consider strategic options. It was then followed by criticisms of Kohl's stock performance the previous year. Kohl's has also been urged to consider a sale, as well as other strategic initiatives, by the hedge fund Engine Capital.
In response to the letter, Kohl's assured investors of its ability to pursue the best actions that would be in the best interest of its shareholders. Kohl's said that its plans to invest in its online and activewear businesses are underway - and succeeding. The company said it recorded a 16% increase in third-quarter sales in November. Its activewear division currently accounts for slightly more than a quarter of its revenue, and it is aiming to make it more inclusive of all sizes.
Kohl's stock has increased by less than 4% in the last year, giving it a market valuation of $6.5 billion. The offer made by the consortium would value the company at $64 per share, a 37% premium to its Friday closing price of $46.84 per share.
Acacia Research has been backed by Starboard Value since 2019, helping it raise equity capital to fund its acquisitions. Sources familiar with the matter said the company already has a letter of confidence from a major bank, which is willing to help it fund the transaction. The same source said Acacia has already reached out to a real estate company, which is willing to help sell part of Kohl's real estate properties.
Apart from the offer it received from the consortium, Kohl's reportedly also received an offer from Sycamore Partners. The private equity company is known for its recent acquisition of major retailers, including Belk Department Store and Staples.
