Kohl’s plummets 20% as the retailer ends talks with Franchise Group for $8 billion buyout

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Kohl’s stock sank 20% on Friday after the company announced it ended talks to sell itself to Franchise Group.

Shares were trading at $28.24 as of 10:25 a.m. ET, down from yesterday’s close of $35.71.

“Despite a concerted effort on both sides, the current financing and retail environment created significant obstacles to reaching an acceptable and fully executable agreement,” Kohl’s Board Chair Peter Boneparth said in a statement. 

The company also said it was lowering sales forecasts for the second quarter, as it becomes the latest big retailer to struggle with high inflation and ebbing customer demand. Consumers slowed their spending for the first time this year in May, and the US Consumer Confidence Index tumbled 4.5 points in June. 

The scuttled deal comes nearly a month after negotiations with Franchise Group, which considered lowering its offer for Kohl’s from $60 a share to $50 last week, a source familiar with the matter told CNBC. Kohl’s also rejected Starboard Value Group’s offer earlier this year, the Wall Street Journal reported, with the retailer stating that Starboard’s bid of $64 a share was too low.

The end of talks with Franchise Group, whose initial offer would have resulted in a buyout of $8 billion, is a blow to Kohl’s investors, who have been pressuring the retailer to sell for months. In January, activist firm Macellum Advisors demanded the company to either make significant adjustments or sell itself.

“Macellum suspects that there are a number of well-capitalized financial sponsors interested in Kohl’s. We have also heard that the board and its representatives have been approached and rebuffed overtures from credible buyers,” the firm stated in a letter to shareholders. “This is unacceptable and, if true, would seem to constitute a meaningful breach of the Board’s fiduciary responsibilities.” 

Even after the latest talks ended without a deal, Kohl’s said in a press release Friday that it is open to other potential buyers, adding it would consider other opportunities that could “maximize value for shareholders”.

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