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Kohl’s pulls the plug on sale process

Illustration of a hand reaching out for a hand shake with another hand making a stop gesture.

Illustration: Aïda Amer/Axios

Kohl’s said it will end talks to sell to Vitamin Shoppe parent Franchise Group, citing the deteriorating retail environment and market volatility.

Why it matters: Kohl’s and Walgreens Boots terminating their sale processes (the former, to sell itself; the latter, to sell a part of its business) underscores how difficult it is to close a deal at the desired price against today's tough financing environment.

What they’re saying: “Despite a concerted effort on both sides, the current financing and retail environment created significant obstacles to reaching an acceptable and fully executable agreement,” Kohl’s chair Peter Boneparth said in a statement.

  • “The board remains open to all opportunities to maximize value for shareholders,” he added.

Driving the news: The company was in a three-week period of exclusive negotiations with Franchise Group that were shelved Friday.

  • Franchise Group had entered the crowded bidding race with a $60 a share offer, but Kohl’s said the company revised the proposal to $53 a share “without definitive financing arrangements to consummate a transaction.”
  • The price of Franchise’s recent proposal reflected “the current financing and retail environment,” Kohl’s said.
  • Kohl’s stock traded near $28, down almost 21%.

Flashback: In January, Acacia Research Corp., backed by activist investor Starboard Value, offered the company $64 a share, a 36% premium from its stock price at the time. (Kohl’s rejected the offer as too low.)

  • Kohl’s has faced pressure for months from activist investors, including Macellum, which it recently bested in a proxy fight. The hedge fund urged the company to explore a sale and restructure its board, arguing Kohl's is undervalued and hasn’t done enough to improve performance.
  • Kohl’s said it engaged with more than 25 parties during the whole process.

☁️ Our thought bubble: Kohl’s fate is up in the air. Its receding stock, lower financial projections for the year and economic headwinds — including a pullback in consumer spending — are all dark clouds on the retailer's horizon.

What’s next: The department store chain said it will consider opportunities to monetize a portion of its valuable real estate portfolio.

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