July 2, 2022

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Franchise Group considers lowering Kohl's bid to nearly $50 per share from $60

Franchise Group considers lowering Kohl’s bid to nearly $50 per share from $60

People walk near the entrance to a Cole store on June 7, 2022 in Doral, Florida. Kohl’s has announced that it has entered into exclusive negotiations with Franchise Group, which is proposing to buy the retailer for $60 per share.

Joe Riddell | Getty Images

Retail Holding Company franchise group Weighs down its width for kohl to nearly $50 a share from about $60, according to a person familiar with the deal talks.

Kohl’s shares fell more than 8% Wednesday afternoon to about $39 a share. They traded as low as $34.64 in late May.

The person, who asked not to be identified because conversations are private and ongoing, said The Franchise Group, owner of The Vitamin Shoppe, and other retailers are actively studying whether the Kohl’s purchase is the best use case for Franchise Group’s capital. The person said the company is increasingly concerned that the environment for some retailers could turn bleaker from here, especially if the United States were to enter a recession.

The person added that the franchise group had lined up in financing with the lenders. But the company, run by CEO Brian Kahn, weighs less now as retailers in general grapple with bloated inventory and rising prices.

high volume retailer targeting He said earlier this month that it would require a short-term hit to earnings as it cancels orders and Distinguish unwanted goods Before the busy back-to-school and shopping seasons. Analysts predict that many retailers will take a similar hit, and it may be an even bigger blow to those that haven’t succeeded in moving products off the shelves.

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Earlier this month, the franchise group Proposes a $60 per share bid for Kohl’s at a valuation of nearly $8 billion. The two companies then entered an exclusive three-week window during which any due diligence measures and final financing arrangements could be confirmed. Expires this weekend.

The supermarket chain outside the malls was first urged to consider selling or another alternative to increase its share price In early December 2021 by New York-based hedge fund Engine Capital. At the time, Kohl’s shares were trading around $48.45.

Then, in mid-January, activist hedge fund Macellum Advisors lobbied Kohl’s to consider selling. Macellum 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.

Earlier this year, Kohl’s Received an offer of $64 per share from Starboard-backed Acacia Research, but deemed the offer too low.

in the middle of may, Kohl’s reports that its three-month sales period ended on April 30th It fell to $3.72 billion from $3.89 billion in 2021.

The retailer cut its full fiscal year earnings and revenue forecasts, which also tarnished the image of a potential deal.

Representatives for Kohl’s and the Franchise Group did not immediately respond to CNBC’s requests for comment.