What happened
Shares of Kohl's (KSS +1.23%) soared 36% on Monday after the department store chain confirmed that it has received interest from potential acquirers.
So what
Kohl's statement came after The Wall Street Journal reported on Friday that a group backed by activist hedge fund Starboard Value offered to buy the retailer for approximately $9 billion, or $64 a share, in cash.
Additionally, Bloomberg reported on Sunday that private equity firm Sycamore Partners also inquired about a possible acquisition of Kohl's. And on Monday, CNBC said Sycamore Partners offered to buy the chain for at least $65 per share.
Multiple investment firms are seeking to acquire Kohl's. Image source: Getty Images.
Potential suitors are reportedly interested in monetizing Kohl's real estate portfolio. They could look to sell the properties Kohl's stores occupy, and then lease them back to the retailer. These so-called sale-leaseback transactions can help to free up cash that could be used for other value-creating purposes.
Now what
Activist investors have been pressuring Kohl's to make changes to its strategy or put itself up for sale. For one, Macellum Advisors claims that Kohl's is "materially mismanaging the business." The hedge fund wants the retailer to sell off its real estate assets and use the proceeds to fund share repurchases.
Kohl's responded to Macellum's claims by highlighting the recent performance of its stores and e-commerce sites. Higher sales combined with rising profit margins will help to drive record earnings per share in 2021, the company said.
Still, Kohl's is facing intensifying pressure from discount retailers and e-commerce rivals, which could put its future success in jeopardy. Many investors, in turn, would likely prefer an acquisition.
