Kohl’s pulls the plug on sale process

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.