Kohl’s Receives $9 Billion Offer Backed by Activist Investor

The department store Kohl’s has received a roughly $9 billion offer to go private in a deal with an investment consortium backed by the activist hedge fund Starboard Value, according to two people familiar with the matter.

The offer highlights the resurgent interest that activist investors are showing in department stores, as brick-and-mortar retailers have struggled with supply chain issues in the pandemic and increasing competition from online sites. Shares of retailers have been under pressure for the past several years, while those of online sites have, until recently, been soaring.

Kohl’s is already under pressure to improve its share price. The activist firm Macellum Advisors, which has a 5 percent stake in Kohl’s, urged the retailer in a letter last Tuesday to explore strategic alternatives, including a sale. That was after it raised similar criticisms over Kohl’s stock performance last year. The hedge fund Engine Capital has also been calling on Kohl’s to consider a sale, along with other strategic initiatives.

The quick procession of Macellum’s letter and the consortium’s offer may be the beginning of a dance to put pressure on Kohl’s to consider a sale — or otherwise quickly boost its share price. In response to Macellum’s letter, Kohl’s said this past week that it was confident in its board and would “aggressively pursue the best interests of all shareholders.”

The private equity firm Sycamore Partners has also reached out to Kohl’s about a potential deal, according to one of the people familiar with the matter, as well as a second person close to the matter. The firm is known for its acquisitions of retailers, including Staples and Belk Department Store.

Kohl’s, based in Menomonee Falls, Wis., and founded in 1962, is a department store focused on casual wear, home wares and sporting goods. Unlike other retailers like Nordstrom, Kohl’s stores are frequently found in smaller shopping centers, rather than malls. That has made its real estate more valuable as malls have fallen on hard times.

A key question will be whether the Starboard consortium will secure the necessary funds to finance the bid, particularly given challenges posed by past leveraged buyouts of retailers, like Toys “R” Us, Payless and Neiman Marcus. Those deals saddled the retailers with debt, leaving them unable to make the necessary investments as e-commerce transformed the retail landscape. All three were eventually unable to make their loan payments and filed for bankruptcy. Both Neiman Marcus and Payless emerged from bankruptcy, while Toys “R” Us ultimately liquidated.

Shares of Kohl’s have risen less than 4 percent over the past year, giving it a market capitalization of around $6.5 billion. The offer, first reported by The Wall Street Journal, would value the retailer at $64 a share, 37 percent premium to its closing price of $46.84 on Friday.

Acacia Research Corporation, which is leading the…