It doesn’t look like Kohl’s’ lengthy bidding process is about to end any time soon.
It could take several weeks, if not longer, for an agreement to be reached, a person familiar with the situation told CNBC. The dialogue has been particularly lengthy due to the difficulty of securing financing in uncertain market conditions, The person said, adding that the likely transaction price for the stock at this point would be in the mid-1950s.
Kohl’s shares closed slightly higher at $41.48 Friday afternoon, giving the company a market value of about $5.33 billion. The stock traded as low as $34.64 on May 24.
“Anyone buying the company is going to need time,” said the person, who asked not to be named because discussions are private and ongoing. “No one is ready to sign a deal now.”
The Wall Street Journal reported Thursday evening that private equity chain Sycamore Partners and retailer Franchise Group have submitted their bids to acquire a supermarket chain outside the mall. The newspaper said it was not clear if any other parties were interested at this time. About two weeks ago, Michelle Gass, Kohl’s CEO, said that final, fully-funded bids are expected from potential buyers in the coming weeks.
This Kohl’s story has been playing for over half a year, which deal experts describe as an abnormal amount of time.
The supermarket chain outside of malls was first urged in early December of 2021 by New York hedge fund Engine Capital to consider a sale, or another alternative to increase its share price. At the time, Kohl’s shares were trading around $48.45.
In mid-January, activist hedge fund Macellum Advisors pressured Kohl’s to consider selling. Macellum’s CEO, Jonathan Doskin, argued that CEOs were “fundamentally mismanaging the business.” He also said Kohl has a lot of potential left to open her real estate.
That was enough for the retailer to get serious about its options. In early February, Coles said it brought in bankers at Goldman Sachs and PJT Partners to help with its retail offerings and also to achieve some outreach.
Spokespeople for Kohl’s and Sycamore declined to comment. The Franchise Group, Goldman Sachs and PJT Partners did not respond to CNBC’s request for comment.
Kohl’s also that month deemed a bid from Starboard-backed Acacia Research, at $64 a share, too low. This bid estimated Kohl’s business at $9 billion.
Cole probably wishes he had accepted that offer, according to Brian Quinn, a professor at Boston College Law School who specializes in mergers and acquisitions.
“The stock price that they thought they might reach internally, no longer seems reasonable,” he said. “I think if you had told the blackboard, [at Kohl’s] What would happen to the market in April and May, they would have sold the company.”
“But the thing is, nobody knows what the future will bring,” he added.
A stellar start to spring combined with waning consumer appetite for discretionary goods amid rising inflation weighed on Kohl’s financial results for the three-month period ending April 30. Sales fell to $3.72 billion from $3.89 billion in 2021. Kohl’s also lowered its full fiscal year earnings and revenue forecast.
Quinn said the bleak outlook may have rocked potential buyers.
“It’s like you’re going to buy a house,” he said. “And as you talk to the seller or the seller’s agent, the ceiling is coming down. This is a very dynamic process in terms of negotiation.”
At one point Simon Property Group, the largest mall owner in the United States, was reported to be among Kohl’s potential bidders. But a person familiar with the situation told CNBC last month, after Cole’s dismal quarterly report, that Simon wasn’t preparing for a show.
Quinn said Kohl’s board may end up withholding the lowest-priced bids and not end up pursuing the sale of the company after all. “They may not sell the company because of the current market situation,” he added.
stock market slippage, Supply chain problems, high interest rates and the war in Ukraine have combined to stifle deal-making and IPOs in the retail sector so far this year.
Experts say it’s not clear when that might return. The consensus seems to be after Labor Day. For Kohl’s, your best bet may be to stall as long as possible.
“Kohl may have received two offers, but it doesn’t like either and isn’t ready to say so with the market so unstable,” Gordon Haskett analyst Don Bilson wrote in a research note. “That, as much as anything else, is why she can bid for more time.”