Shares of Kohl’s (NYSE:KSS) stock are up 31% today on media reports that private equity firm Sycamore Partners is preparing a $9 billion U.S. takeover offer for the retailer.
So what do you need to know?
Rumors of the offer from Sycamore suggest it is willing to pay at least $65 per share for Kohl’s. This is great news for KSS stock investors, as it implies a 39% premium to the stock’s last closing price. The Sycamore offer also comes just two days after Acacia Research (NASDAQ:ACTG) offered to pay $64 a share for Kohl’s, setting up a potential bidding war.
Investors should know that activist investor Starboard Value is a backer of Acacia.
What Happened With KSS Stock
So what else do investors need to know? Right now, it seems many are weighing the details of the two offers. Acacia Research plans to sell Kohl’s real estate holdings to help raise capital. However, the retailer may not be on board with that proposition. The offer from Acacia comes out at $64 per share of KSS stock.
Prior to the takeover offers, Kohl’s had been facing pressure from activist investors to perform better for roughly a year. It seems activists’ unhappiness has now reached a boiling point.
KSS stock has underperformed over the last year. The share price has declined nearly 10% over the past six months to close Friday at $46.84 per share.
Why It Matters
Like other department store chains Macy’s (NYSE:M) and Nordstrom (NYSE:JWN), Kohl’s has been losing market share to off-price chains and e-commerce rivals.
However, Kohl’s has tried to right its ship, forming partnerships with LVMH’s (OTCMKTS:LVMHF) Sephora and PVH Corp’s (NYSE:PVH) Calvin Klein brands, which has earned praise from some analysts who cover the retail sector.
The takeover offers represent a sizable premium to where KSS stock has been trading and are a positive development for shareholders who have been waiting for a catalyst to move the share price higher for more than a year now.
What’s Next for Kohl’s
Although Sycamore Partners has not officially made an offer, Kohl’s share price is going to jump much higher today. The gains could continue if a bidding war for the retailer escalates between Sycamore Partners and Acacia Research. Current shareholders have reason to be happy about these developments as a sale looks like the best outcome for struggling Kohl’s.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines