Kohl's In Final Talks For Franchise Group's $9B Takeover

According to the companies, Kohl's and Franchise Group are in a three-week exclusive negotiation for Franchise Group to acquire the department store for $60 per share in cash, subject to both boards' approvals (Tuesday, June 7, 2022, in Manila), Daphne Howland reported for the trade magazine Retail Dive.

Photo Insert: Kohl's started 2022 with activist investors on its case, and a sale has become increasingly likely with each passing month.

Franchise Group, which owns Pet Supplies Plus, American Freight, The Vitamin Shoppe, Badcock Home Furniture & More, Buddy's Home Furnishings, and Sylvan Learning, plans to contribute approximately $1 billion to the transaction, which will be funded through an increase in its secured debt facilities.

According to analysts, the purchase price is around $9 billion. According to Franchise Group, the majority of that money will be used to leverage Kohl's real estate assets.

Aside from the $1 billion increase in secured debt, Franchise Group stated that it will not be responsible for any of the financing.

Kohl's started 2022 with activist investors on its case, and a sale has become increasingly likely with each passing month. Private equity firm Sycamore Partners, Canadian department store company Hudson's Bay Co., and Amazon have all been mentioned as potential suitors.

Franchise Group is the last one standing, at least for now. Finalizing the deal would take a lot of debt, though B. Riley analysts led by Susan Anderson said in a client note that between the value of Kohl’s real estate and its record of strong cash generation, it could be quickly paid down.

Still, the load will hamper Kohl’s as it tries to soldier on with its turnaround, GlobalData Managing Director Neil Saunders said in emailed comments, calling the debt level the “biggest downside” of the deal.

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