Kohl’s confirmed receiving expressions of interest in acquiring it.
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A reported $9 billion bid for Kohl’s is “very modest,” Cowen analysts wrote in a note Monday morning as the department-store chain looks at possible takeovers.
The company confirmed Monday morning it received letters expressing interest in acquiring it, and said in a news release it doesn’t intend to further comment publicly on the topic unless it is in shareholders’ best interest to do so.
The Wall Street Journal reported over the weekend that Acacia Research, which is controlled by the activist hedge fund Starboard Value, offered $64 a share for Kohl’s (ticker: KSS), saying it had been assured by bankers that it would be able to get financing for the transaction. Shares of Kohl’s were up nearly 3w% to $61.61 in early trading.
But the possibility of $64 a share could just be the beginning, Cowen analyst Oliver Chen said. He rates the stock at Outperform, and raised his target for the price to $75 from $73.
“We believe management is on the right track given agile strategies including the Sephora partnership, continued focus on the active segment, and new brand rejuvenation particularly in women’s apparel,” Chen wrote in a research note.
Kohl’s also received a potential offer from Sycamore Partners, Bloomberg reported, citing people familiar with the matter. A potential price wasn’t disclosed in the report. Kohl’s didn’t say what companies had expressed interest in buying it.
Chen said his base case for the stock includes better traffic at physical stores, reduced pressure on margins, and the resumption of dividend payments. His upside scenario for the stock includes more momentum than expected in active and women’s apparel, among other factors, he said.
The bid represents a discount to both the offers in recent department-store deals, and to Kohl’s valuation in recent years, J.P. Morgan analyst Matthew Ross said in a research note Monday. He noted that the reported Acacia Research bid represents almost five times the company’s earnings before interest, taxes, depreciation, and amortization.
Chen said he is 60% to 70% confident a deal could be executed, but that it will take time, and that it is likely that the $64 a share offering will be the starting point for negotiations moving forward. Kohl’s peers, including Macy’s and Nordstrom, could see higher valuations regarding potential e-commerce spinoffs too, he said.
The stock has gained 4.25% the last 12 months.
Write to Logan Moore at logan.moore@barron’s.com
