People walk near the entrance to the Kohl department store on June 7, 2022 in Doral, Florida. Kohl’s announced that it has entered into exclusive negotiations with the Franchise Group, which is proposing to buy retail for $ 60 per share.
Joe Raedle Getty Images
Retail holding company Franchise Group is aiming to reduce its offer for Kohl’s to close to $ 50 per share from about $ 60, says a person familiar with the contract negotiations.
Stocks fell more than 8% on Wednesday afternoon to approximately $ 39 per share. At the end of May, they traded at only $ 34.64.
Franchise Group, the owner of The Vitamin Shop and other retailers, is actively considering whether buying Kohl is the best case for using Franchise Group’s capital, said a person who asked to remain anonymous because the talks are private and ongoing. The company is increasingly worried that the environment for certain retailers from here could become darker, especially if the United States enters a recession, the person said.
The franchise group coordinated the financing with the lenders, the person added. But the company, led by CEO Brian Kahn, is now pushing for lower prices because retailers are struggling with inflated stocks and higher prices.
Big seller Target said earlier this month that it will affect profits in the short term because it cancels orders and reduces unwanted goods ahead of the busy shopping season at school and holidays. Analysts expect that many retailers will have to endure a similar blow, and that could be a bigger blow for those who are not so successful in moving products off the shelves.
Earlier this month, the Franchise Group proposed a $ 60 offer per share to buy Kohl’s at an estimated $ 8 billion. The two companies then entered an exclusive three-week period during which they can confirm any due diligence and final financial arrangements. It ends this weekend.
The department store chain outside the malls first called for a sale or other alternative to increase the share price in early December 2021 by the New York hedge fund Engine Capital. At the time, Kohl’s stock was trading at about $ 48.45.
Then, in mid-January, activist hedge fund Macellum Advisors put pressure on Kohl’s to consider a sale. Macelum CEO Jonathan Daskin claimed that the executives were “materially mismanaged”. He also said that Kohl still has a lot of potential to unlock with his real estate.
Earlier this year, Kohl’s received a $ 64 share offer from Starboard-backed Acacia Research, but felt the offer was too low.
In mid-May, Kohl’s reported that its sales for the three-month period ended April 30 fell to $ 3.72 billion from $ 3.89 billion in 2021.
The seller reduced its profit and revenue forecasts for the entire fiscal year, which also blurred the picture of potential business.
Representatives of Kohl’s and Franchise Group did not immediately respond to CNBC’s requests for comment.
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