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Kohl's and Franchise Group are exclusive

Illustration of two people shaking hands on a giant stack of money.

Illustration: Aïda Amer/Axios

Kohl's (NYSE: KSS) entered into exclusive negotiations with Franchise Group (Nasdaq: FRG) and its finance partners for a three-week period, the company said Monday. The talks are tied to the bidder's $60 per share final proposal.

Why it matters: The long-running auction is approaching its end game.

Details: The transaction remains subject to the approval of both boards, Kohl's said, and added it will have no further comment until an agreement is inked or talks have been terminated.

  • The talks are tied to Franchise Group's $60 per share proposal, and will be used to finalize due diligence, financing arrangements, and the negotiation of a binding agreement.
  • Based on almost 128.5 million shares outstanding, according to SEC filings, the bid awards the department store chain a market cap of about $7.7 billion.
  • Kohl's enterprise value would be about $8.8 billion, based on cash and cash equivalents of close to $650 million and long-term debt of approximately $1.75 billion.
  • A report on Friday singled out Franchise Group, a holding company of retail brands such as Vitamin Shoppe, and PE firm Sycamore Partners as each having submitted final offers.

The intrigue: Franchise Group, which had revenue of nearly $3.3 billion for fiscal 2021, is making a play for a retailer with almost $18.5 billion in revenue, or more than five times its size.

  • The bidder currently has a market cap of about $1.5 billion, cash and cash equivalents of nearly $150 million, and long-term obligations of close to $1.3 billion, according to SEC filings.
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