Kohl's (KSS) Shares Explode 30% as Takeover Battle Heats Up

January 24, 2022 5:54 AM EST

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Shares of Kohl’s (NYSE: KSS) are up nearly 30% in pre-open Monday after another suitor entered the takeover arena for the department store retail chain.

Sycamore Partners is the latest company to make a bid to acquire department store retailer Kohl’s Corporation, according to Bloomberg.

At the moment, Kohl’s is facing bids from two interested parties after Acacia Research Corp also made an offer last week. The retailer is also dealing with significant pressure from its stakeholders who are pushing the company to sell.

Sycamore’s bid remained undisclosed as the takeover discussions are still preliminary and a long way from an agreement.

Last Friday, Bloomberg reported that Acacia Research Corp, backed by hedge fund Starboard Value LP, has made a $9 billion bid to acquire Kohl’s. Acacia, which has previously acquired only smaller tech companies, offered to pay $64 per share for Kohl’s - a 37% premium to the company’s closing stock price of $46.84 on Friday.

Acacia already holds a stake of less than 5% in the department store retail chain, according to Bloomberg.

In addition to acquisition bids, Kohl’s is also facing strong pressure from its investors including Macellum Advisors, which is pushing the department store company to make board changes or explore sale options.

Moreover, another activist investor Engine Capital which holds close to 1% of Kohl’s outstanding shares, asked the company’s board in December to review alternative strategies, including a sale. Engine Capital has sent a new letter Sunday, pushing Kohl’s to start the sales process, according to the report by Wall Street Journal.

Over the past several months, Kohl’s has been looking to find new ways to drive sales at its stores and has teamed up with a few other retailers, including Amazon.

Commenting on the developments, Cowen analyst Oliver Chen views the reported $64 per share bid as "modest" at only 3.7x TTM EV/EBITDA. Chen sees other potential strategic/financial bidders coming to the table and models upside to $85+ per share, or 5x EV/EBITDA.

By Senad Karaahmetovic | [email protected]

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