Macellum Advisors, the activist shareholder that owns nearly 5 percent of Kohl’s Corp., is putting more heat on the retailer by nominating 10 candidates to the board of directors.
Macelllum’s move is a reaction to last week’s rejection by Kohl’s of at least two takeover offers — including from Acacia Research Corp. and reportedly from Sycamore Partners — and the retailer’s enactment of a poison pill.
For months, Macellum has been pushing for changes at Kohl’s in what it claims is an effort to bolster the financial performance of the company and raise shareholder value. Last year, Macellum was successful in getting two individuals of its choice placed on the board, and a third person was added to the board by mutual agreement between the activist and Kohl’s. Now Macellum hopes to completely overhaul the Kohl’s board through a vote which would be tallied at the retailer’s next annual meeting of shareholders.
Related Galleries
The board candidates nominated by Macellum include several from the retail and fashion industry and was expected. Last week, Macellum said it planned to add a slate of candidates for the board who will be “open-minded when it comes to pursuing all paths to maximizing value.”
“In the wake of the troubling press release issued by Kohl’s last Friday, we are convinced — now more than ever — that a majority of the company’s board needs to be refreshed,” Macellum wrote in a letter to shareholders on Thursday, which was signed by Jonathan Duskin, Macellum’s chief executive officer and managing partner. He’s also on the slate of nominees to the Kohl’s board.
“The board’s decision to hastily reject at least two recent expressions of interest to acquire the company, both of which included sizable premiums, suggests it is no longer operating with impartiality and objectivity. The fact that the board simultaneously adopted what appears to be an onerous, two-tiered poison pill indicates to us it is also no longer prioritizing shareholders’ interests. In our view, any directors that support such patently anti-shareholder maneuvers cannot be trusted to credibly evaluate potentially value-maximizing alternatives versus management’s perpetually ineffective plans.”
Macellum wrote that it believes Kohl’s is doing “everything in its power to chill a normal-course sale process and quell interest from other bidders during what we view as a unique window of opportunity.”
But Kohl’s fired back at Macellum, stating it believes Macellum’s effort to take control of the board is “unjustified and counterproductive.”
“Kohl’s appointed two of Macellum’s designees, along with an additional mutually agreed upon designee, to its board pursuant to the 2021 settlement agreement with Macellum and certain other shareholders. All members of the Kohl’s board, other than its CEO (Michelle Gass), are independent. Macellum’s claim that Kohl’s board is not equipped to evaluate sale opportunities is groundless,” Kohl’s said in its statement Thursday.
The Menomonee Falls, Wisc.-based value department store pointed out that its board has a finance committee, which includes one of Macellum’s 2021 designees, and has hired Goldman Sachs and PJT Partners, to advise on any offers.
Kohl’s also said Macellum’s characterization of its poison pill, otherwise called a limited-duration shareholder rights plan, is “misleading,” adding, “The board adopted the rights plan to protect shareholder value by ensuring that the board can conduct an orderly review of any expressions of interest and by preventing any person or group from gaining control of Kohl’s through open market accumulation.”
In its letter to shareholders, Macellum cited speculation that Kohl’s corporate jet recently flew to Seattle, where Amazon is headquartered, implying a potential “pursuit of a sweetheart deal that unjustifiably favors existing executives and directors.” There has been speculation that Amazon could bid for Kohl’s, and that the online giant would be interested in some of Kohl’s store locations to convert to warehouses and that Kohl’s concentration in casual and activewear could benefit Amazon’s apparel business. Kohl’s and Amazon have close ties stemming from Kohl’s having sites in its store for Amazon returns.
The store chain last Friday rejected a bid by Acacia, which is controlled by activist hedge fund Starboard Value LP, to acquire 100 percent of the outstanding shares of Kohl’s for $64 a share in cash, valuing the company at $9 billion. It is also believed that Kohl’s rejected a $64 to $65 offer from Sycamore Partners, a private equity firm that has Belk, Loft, Express, Hot Topic, Ann Taylor and other retailers in its portfolio.
The poison pill makes it more expensive to take over a company through a dilution of shares.
Kohl’s will disclose its fourth-quarter and year-end earnings on March 1 and has scheduled an investor’s meeting on March 7. Details about the company emanating from those events could factor into whether Kohl’s gets sold or not.
Macellum has run activist campaigns and brought change to The Children’s Place Inc., Citi Trends Inc., Bed Bath & Beyond and Big Lots Inc.
Macellum’s nominees, aside from Duskin, are:
• George Brokaw, director at Dish Network, CTO Realty Growth and Alico; former managing director at Lazard Frères, Highbridge Growth Equity Fund and head of private equity at Perry Capital.
• Francis Ken Duane, former executive vice chairman at PVH Corp.; former president of Guess; executive roles at Nautica, Hugo Boss and Burberry.
• Pamela J. Edwards, chief financial officer and executive vice president of Citi Trends; former executive at Bath & Body Works, Mast Global, Victoria’s Secret and Express, and board member at Neiman Marcus Group.
• Stacy Hawkins, a diversity consultant and vice dean of Rutgers Law School.
• Jeffrey A. Kantor, president of JAK Consulting and former Macy’s chief merchandising officer and chief stores officer, and former chairman of macys.com.
• Perry M. Mandarino, senior managing director of B. Riley Securities; former partner at PricewaterhouseCoopers, and board member at Bebe Stores.
• Cynthia S. Murray, founder and CEO of Stanmore Partners; former president of Chico’s and Full Beauty Brands; former executive at Talbots and Saks Off 5th.
• Kenneth D. Seipel, principal of Retail Business Optimization consulting; Citi Trends board member; formerly Gabriel Brothers CEO; former president at Wet Seal and Pamida Discount Stores.
• Craig M. Young, founder/managing principal, Tidewater Capital; president of Chain of Lakes Capital, and former executive at JBG Companies; Sembler Investments, and Deutsche Bank.