Macellum Advisors, the activist shareholder, contends it’s being kept in the dark on bids for Kohl’s Corp. and wants greater access to information on the process.
Macellum, which holds nearly 5 percent of Kohl’s shares, wants to overhaul the retailer’s board and management, and for months has been pushing strategic alternatives to raise shareholder value, including advocating selling the company or monetizing stores through sale-leasebacks, or splitting the dot-com and store operations into separate companies. Macellum is asking shareholders to vote for its slate of 10 nominees to the Kohl’s board, one of whom is Macellum’s founder and managing partner, Jonathan Duskin.
There’s been an ongoing war of words between Macellum and Kohl’s for weeks, with Macellum accusing Kohl’s of poor management and obtaining inadequate top- and bottom-line results underperforming competitors, while the retailer has been vigorously defending its recent financial results and strategies.
On Monday, Macellum raised the cacophony, accusing Kohl’s of staging “a flawed and opaque review of strategic alternatives.”
“In all of our years investing in the public market, we have never seen a corporate leadership team operate in a more defensive and insular manner when many shareholders seem very supportive of a sale and various suitors have expressed interest,” Duskin wrote in his letter to shareholders. “Perhaps this is why the company’s shares have the rare distinction of trading almost 15 percent below announced and reported offers,” which have been in the mid to high $60 range. Kohl’s stock closed at $60.62 on Monday.
Macellum also accused the Kohl’s board of “abruptly rejecting indications of interest from two credible and well-capitalized acquirers before apparently providing sufficient access to management, a robust data room and other information that could have informed upward adjustments to offers; quickly implementing an onerous, two-tiered poison pill that could only serve to chill acquirers’ interest, and failing to communicate clearly and effectively about its purported process for evaluating potential acquirers’ overtures, even as credible reports swirl about several suitors who are interested in bidding close to or above $70 per share.”
Among the reported bidders are the Hudson’s Bay Co., operator of Saks Fifth Avenue, Saks Off 5th and The Bay in Canada; Sycamore Partners, a private equity firm that has Belk, Loft, Hot Topic, Ann Taylor and other retailers in its portfolio; Leonard Green & Partners, a private equity firm, and Starboard Value’s Acacia Research Corp.
Macellum also accuses Kohl’s of “championing a capital-intensive and risky three-year plan that only appears to derive earnings per share growth from share repurchases” and said Kohl’s board has rejected appointing a Macellum principal as a director.
Macellum wrote that “a number of sizable shareholders have informed us that they are extremely frustrated with the board’s poorly communicated process, and urged the Kohl’s board to answer several questions, including what the status of the bidding process is in terms of the number of interested parties and management’s level of engagement and data sharing; when final bids will be gathered and will that happen before the May 11 annual meeting so shareholders can be fully informed before they vote on Macellum’s board nominees, or the existing Kohl’s board members who are all up for reelection.”
Macellum also wants to know what steps the board is taking to ensure bidders have everything they need to expeditiously submit initial and modified bids, and if Kohl’s financial adviser, Goldman Sachs, was authorized to canvas for a full spectrum of financial and strategic bidders, including allowing bidders to partner up on a high price.
It’s possible Kohl’s annual meeting gets delayed if the bidding process goes beyond May 11.
In response to Duskin’s letter on Monday, Kohl’s issued the following statement:
“The Kohl’s board will not allow Macellum’s ill-informed commentary and push for a quick sale at any price to drive process decisions. The board is thoughtfully and thoroughly evaluating proposals to realize full and fair shareholder value and weighing those against the value-creation potential of a compelling strategic plan. Kohl’s board is far more qualified to direct this process than Macellum and its slate of nominees, over half of whom have never served on a public company board and none of whom have served on a board of a retail company approaching the size of Kohl’s.”