Kohls rejects the takeover attempt by the activist group of investors, shares rise
Customers leave a Kohl’s store on November 12, 2015 in San Rafael, California.
Justin Sullivan | Getty Images News | Getty Images
Kohl’s said Monday that he would oppose any attempt by a group of investors to take control of their board and would disrupt the momentum they had in transforming their business.
The retailer’s shares rose more than 8% Monday after a group of activist investors confirmed they had appointed nine directors to the company’s board of directors to turn the deal around and bolster the stock. The group consists of Macellum Advisors, Ancora Holdings, Legion Partners Asset Management and 4010 Capital and together has a 9.5% stake.
Investors want Kohl’s to add directors with extensive retail experience, cut executive pay, cut inventory, and consider selling some of its non-core properties. They estimate that real estate wealth could be anywhere from $ 7 billion to $ 8 billion.
The group hopes to keep the share price more than double its current level through a $ 3 billion real estate sale-leaseback program and an extensive share buyback program.
Although Kohl’s said it had spoken with the group since early December, the company said this was the first time investors had detailed their plans.
“Our new strategic plan already includes several of their proposed initiatives, and we have also found that other ideas they proposed do not add shareholder value,” it said.
For example, Kohl’s said it was regularly considering sale-leaseback transactions, some of which were undertaken during the pandemic, to raise the capital it needed. However, a contract signed in 1995 currently prevents the retailer from entering into further sale-leaseback deals.
The company said its board of directors and management team will continue to hold discussions with the group with the aim of “identifying new ideas that could add shareholder value”.
Current CEO Michelle Gass, a former Starbucks executive, took over from Kevin Mansell in 2018. Her initiatives include expanding an Amazon returns service in Kohl’s stores and adding hundreds of Sephora beauty salons to the stores, which will be launched this fall.
Kohl’s business faced headwinds even before the Covid pandemic, when the retailer sold customers to online players like Amazon and big box companies like Target and Walmart. However, especially in the past year, losses have increased as many Americans stayed home during the pandemic. Kohl’s total revenue declined 25% to $ 9.8 billion for the nine months ended October 31, while his losses were $ 506 million, compared to a profit of $ 426 million last year.
Investor group nominees include Jonathan Duskin, Chief Executive of Macellum, Thomas Kingsbury, former CEO of Burlington Stores, and Margaret Jenkins, Chief Marketing Officer of Denny.
Legion, Macellum and Ancora previously teamed up to force change at Bed Bath & Beyond, eventually adding five members to the retailer’s board of directors. CEO Steven Temares has also been replaced by former Target manager Mark Tritton.
“It’s shocking to us that they are no longer willing to take our option … to help our offer. We really want to fix this deal,” Duskin said of Kohl’s response in an interview with CNBC’s Scott Wapner on Monday.
He added that the group made their efforts public because the Kohls “really wasn’t ready to move”.
“Let’s take this to the court of public opinion and let our shareholders understand,” he said.
At the close of trading on Friday, Kohl shares were up almost 20% year on year. With a market capitalization of around $ 8.3 billion, Kohl’s has grown larger than Nordstrom and Macy’s.
Kohl’s will announce its fourth quarter results on March 2nd.
Read the full letter from the investor group.