Activist pressures Kohl’s to consider selling online biz, the report states

People are shopping at Kohl’s department store in the middle of the coronavirus outbreak on September 5, 2020 in San Francisco, California.

Liu Guanguan | China News Service | Getty pictures

An activist is said to have pressured Kohl’s to consider either a sale or a separation of its online business, following a similar move by the department store chain Saks Fifth Avenue, according to The Wall Street Journal.

New York-based hedge fund Engine Capital reportedly wants Kohl̵[ads1]7;s to explore the two options to try to raise its stock price, the WSJ said. The activist group sent a letter to Kohl’s board on Sunday, the report states. Engine Capital owns a stake of approximately 1% in Kohl’s.

Kohl’s shares closed at $ 48.45 on Friday, about where they traded a decade ago, giving Kohls a market value of around $ 7.3 billion – less than Macy’s, but more than Nordstroms. Kohl’s share is up about 19% so far this year, and is worse than the S&P 500.

According to the WSJ, Engine Capital said in its letter that provided that Kohl’s brings in online sales revenue of around $ 6.2 billion, Kohl’s digital business alone will be worth $ 12.4 billion.

Engine Capital also said they believe private equity firms will pay at least $ 75 a share, the report said. And the group of investors said that talks with potential buyers indicate that they can make money on Kohl’s property further, the WSJ reported.

Representatives from Kohl’s and Engine Capital did not immediately respond to CNBC’s request for comment.

These conversations arise when investors see the appeal of owning part of a faster-growing e-commerce division with more technologically savvy operations. Saks’ digital arm is now aiming to be listed on the stock exchange with a value of 6 billion dollars, or about six times the turnover. It had a valuation of $ 2 billion as recently as March.

Meanwhile, Macy’s has been urged by activist group Jana Partners to spin its e-commerce business out of stores, hoping to achieve a higher value. Macy’s has since hired the consulting firm AlixPartners to review the business structure.

“We also recognize the significant value the market attaches to pure e-commerce businesses,” said Macy’s CEO Jeff Gennette in a recent earnings interview. “And as we look at the landscape today, we are making further analyzes that can help inform our long-term strategy to further unlock value for Macy’s.”

Kohl’s recently had another clash with activist investors who raised doubts about the company’s direction and tried to take control of the board. The group – Macellum Advisors, Ancora Holdings, Legion Partners Asset Management and 4010 Capital – reached an agreement with the dealer in April and added a few investor-backed independent board members to the board.

In 2014, Engine Capital pressured Ann, which owned fashion brands Ann Taylor and Loft, to sell itself. The company did so the following year.

Read the full report from the Wall Street Journal here.

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