Kohl’s said Friday it believes recent takeover bids undervalue its business given future growth and cash flow generation, following a review by independent financial advisers.
The department store also said it had adopted a shareholder rights plan, also known as the “poison pill,” to stave off a hostile takeover. The plan is effective immediately and expires in February 2023.
Kohl’s shares rose more than 2% on Friday. The stock has surged in recent weeks on news from potential buyers but remains below a 52-week high of $64.80 set last May.
“The valuations provided in the current expressions of interest do not adequately reflect the value of the company in terms of its future growth and cash flow generation,” Kohl’s said in a statement.
Last month, Acacia Research, backed by activist investment firm Starboard Value, offered to pay $64 a share for Kohl’s, valued at about $9 billion. Private equity firm Sycamore Partners was also planning an offer of $65 per share, people familiar with the offer told CNBC.
The Kohl’s logo is placed on the exterior of a Kohl’s store on January 24, 2022 in San Rafael, California.
Justin Sullivan | Getty Images
Activist hedge fund Macellum Advisors, meanwhile, has asked Kohl’s to consider selling it and wants at least one seat on the retailer’s board. It is planned to present a list of nominees for the board “in the coming days”.
“We are disappointed and shocked by Kohl’s hasty rejection of confirmed expressions of interest,” said Jonathan Duskin, Macellum’s managing partner, in a letter issued Friday after Kohl’s decision was announced. “This morning’s rejections – coming just two weeks after being contacted by potential buyers – only confirm to us that a majority of the board is firmly entrenched and lacking in objectivity when it comes to evaluating value-maximizing opportunities versus the to evaluate historically ineffective individual plans of the management.”
Kohl’s reiterated Friday that its board is committed to maximizing shareholder value and will review and pursue opportunities that the company believes will “plausibly result in values consistent with its performance and future opportunities.”
The department store has formed a Finance Committee composed entirely of independent directors to lead an ongoing review of any future expressions of interest in the company. It is also working with bankers from Goldman Sachs and PJT Partners in this effort.
Kohl’s said its shareholder rights plan is triggered when an individual or group acquires an economic interest of 10% or more. In this case, existing investors can buy new shares at a 50% discount. The trigger for passive institutional investors is 20%, according to the company. It added that existing stocks will be taken over.
Cowen & Co. analyst Oliver Chen had previously said he didn’t expect the $64 and $65 per share offers to be enough given the underlying value of Kohl’s properties. Last month, Chen said he estimated Kohl’s stores could sell for between $10 million and $14 million apiece, depending on location and traffic. However, Kohl’s has resisted additional sale-leaseback transactions.
At the time, Chen said there was a 30% to 40% chance a deal would close for $75 a share or more. However, he also said that there is a 40 percent chance that there is no transaction.
Kohl’s said it plans to provide more updates on its strategy during an investor day scheduled for March 7.
Kohl’s shares are up nearly 19% this year through Thursday’s close. This increases the market capitalization to 8.2 billion US dollars.
Read Kohl’s full press release here.