Kohl’s rejects buyout offers; adopts plan to avert hostile takeover

Kohl’s Corp. is taking a ‘poison pill.”

The department store retailer said it is rejecting the takeover offers it received, saying they undervalue the business.  It also said it has adopted a shareholder rights plan, commonly knowns as a “poison pill,” to avert a hostile takeover of its business. The plan, scheduled to expire in February 2023, will become exercisable if any stockholder acquires 10% beneficial ownership, or 20% in the case of passive institutional investors.

Activist investor Macellum Capital wasted no time in responding to Kohl's statement, saying it was "disappointed and shocked by Kohl’s hasty rejection of confirmed indications of interest."

"This morning’s rejections – which come just two weeks after outreach from potential acquirers – only validates for us that a majority of the Board is entrenched and lacks objectivity when it comes to evaluating value-maximizing sale opportunities relative to management’s historically ineffective standalone plans," Macellum managing partner Jonathan Duskin said in a statement.  "We doubt that interested parties were given adequate consideration or access to management, data rooms and the type of information required to inform upward adjustments to bids."

Macellum, which owns nearly a 5% stake in Kohl's, said that it will be nominating a slate of directors in the "coming days"  who will be "far more aligned, experienced and openminded when it comes to pursuing all paths to maximizing value.”

In its statement, Kohl’s said it believes the  buyout offers it received undervalue its business given the company’s future growth and cash flow generation, following a review by independent financial advisors.

“The valuations indicated in the current expressions of interest which it has received do not adequately reflect the company’s value in light of its future growth and cash flow generation,” Kohl’s stated. “The Board is committed to maximizing the long-term value of the company and will review and pursue opportunities that it believes would credibly lead to value consistent with its performance and future opportunities.”

In January, Acacia Research Corp backed by activist investment firm Starboard Value, offered to pay $64 a share for Kohl’s, valuing it at about $9 billion. Private equity firm Sycamore Partners was also reportedly planning to make an offer. Last week, Kohl’s has been undertaking a turnaround that includes in-store Sephora shops, brand partnership and a focus on athleisure merchandise. Its plans, however, have come under fire from activist hedge fund Macellum Advisors, which has a roughly 5% stake in Kohl’s.

“We have a high degree of confidence in Kohl’s transformational strategy, and we expect that its continued execution will result in significant value creation,” stated Kohl’s chairman Frank Sica. “The Board is committed to acting in the best interest of shareholders and will continue to closely evaluate any opportunities to create value.”

Kohl’s said it will provide more updates on its strategy during an investor day on March 7.