“Given the environment and market volatility, the Board determined that it simply was not prudent to continue pursuing a deal,” said chairman Peter Boneparth.
Kohl’s Corp. (KSS) – Get Kohl’s Corporation Report shares plunged lower Friday after the struggling retailer ended talks with the Franchise Group (FRG) – Get Franchise Group Inc. Report over a possible $8 billion takeover.
CNBC first reported late Thursday that Kohl’s has ended the exclusive talks, which began early last month, following market speculation that the Franchise Group was looking to reduce its bid for Kohl’s by $10, to $50 a share, amid the broader market sell-off.
The Vitamin Shoppe operator was given an exclusive three-week window on June 7 to “finalize due diligence and financing arrangements”, Kohl’s had said, and ultimately reduced its bid to $53 per share.
Kohl’s had earlier attracted interest from a host of private equity firms and retail asset investors, including Sycamore Partners, Simon Property Group (SPG) – Get Simon Property Group Inc. Report and Brookfield Asset Management.
“Throughout this process, the Board has been committed to a deep and comprehensive review of strategic alternatives with the goal of selecting the path that maximizes value for shareholders,” said Kohl’s chairman Peter Boneparth. “After engaging with more than 25 parties in an exhaustive process, FRG emerged as the top bidder and we entered into exclusive negotiations and facilitated further due diligence.”
“Despite a concerted effort on both sides, the current financing and retail environment created significant obstacles to reaching an acceptable and fully executable agreement,” he added. “Given the environment and market volatility, the Board determined that it simply was not prudent to continue pursuing a deal.”
Kohl’s shares were marked 16.4% lower in pre-market trading to indicate an opening bell price of $29.85 each.
Kohl’s said it will conduct an “accelerated share repurchase program” to soften the blow of the failed sale, while adding it will update on plans to navigate the current retail environment when it publishes second quarter earnings on August 18.
“As inflationary pressures on the consumer continue, the Company is seeing a softening in consumer spending and now expects sales to be down high-single digits for Q2, as compared to our prior expectations of down low-single digits relative to last year,” Kohl’s said.