Kohl's Ends Merger Talks; Says Current Environment Makes Sale Unattainable (2024)

Kohl’sCorp. said Friday (July 1, 2022) that it is no longer pursuing a sale to retail holding companyFranchise GroupInc.

The Wisconsin-based Kohl’s — a Midwestern retail icon — said it would instead focus on navigating current retail conditions on its own, reported The Wall Street Journal.

Kohl’s Chairman Peter Boneparth said that recent choppiness in the financing market and the retail industryhad made a deal unattainable, according to the Journal.

But he added that the board has confidence in the company’s management to execute its strategic plan. The company hopes it can unlock value for shareholders in other ways, including a stock buyback and the possible sale of some real estate.

“While there was criticism from activists, the vast majority of shareholders are supportive of the direction management is taking the company,” Boneparth said.

Just last month, Kohl’s had said it was in advanced talks to be acquired for some $8 billion, then around $60 a share, by Franchise Group, a retail holding company that includes the Vitamin Shoppe.

Kohl’s originally had hoped for a buyout offer as high as $70 a share. Kohl’s stock fell about 20 percent on Friday, closing at $28.68 a share.

Inflation is driving interest rates higher and raising the cost of capital, slowing deal-making from its record-setting pace last year, the Journal reported.

On Friday, Panera Brands Inc. — the owner of Panera Bread, Caribou Coffee and Einstein Bros. Bagels — said plans for an initial public stock offering were being put on hold because of unfavorable market conditions.

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Earlier this year, Kohl’s had reportedly been offered $8.6 billion to merge with JCPenney, according to several media reports.

These earlier suitors had hoped that merging JCPenney and Kohl’s would enable them to streamline operations, merge IT systems and slash costs by $1 billion over the next three years. TheJCPenneyand Kohl’s brands would have remained separate, according to a report by the New York Post.

Earlier reports had indicated that the sale of Kohl’s would likely end plans to bring more Sephora mini-shops inside Kohl’s stores. It remains unclear what the fate of the existing Sephora counters will be.

The partnership with the Sephora beauty brand, which aimed to “draw new and younger customers” to Kohl’s department stores, began in 2020,according to Patch.com.Some 850 Sephora stores inside Kohl’s stores were planned to open by 2023.

Kohl’s had announced plans earlier this yearto add Sephora mini-shops to about 75 percent of its 1,100 US stores. Kohl’s also had planned to open 100 new locations at half the size of its traditional outlets in the next four years and increase its Kohl’s Cash rewards program from 5 percent to 7.5 percent on purchases, CNN reported.

Private equity giants Sycamore Partners and Leonard Green & Partners as well as Saks Fifth Avenue’s Canada-based parent company Hudson’s Bay have been interested in acquiring Kohl’s.