Kohl’s Corporation (NYSE: KSS) is up 10% on Tuesday after the department store retail chain confirmed it was now in advanced takeover talks with Franchise Group.
There’s no guarantee that an agreement will be signed
The retail holding company is willing to pay $60 a share for Kohl’s, valuing it at roughly $8.0 billion. Franchise Group will be using the three-week exclusivity period to conduct due diligence and arrange financing.
Both parties are yet to secure approval from their respective board of directors. It is, therefore, not guaranteed yet that an agreement will be signed.
The Virginia-based suitor already owns notable brands in the retail space, including Buddy’s Home Furnishings and the Vitamin Shoppe. Kohl’s says it will make no further comments until the deal is finalised.
Franchise was initially willing to pay a higher $69 a share
Originally, Franchise Group approached Kohl’s for a potential buyout in mid-April. At the time, it had valued the retailer at $69 a share.
But in subsequent weeks, the retail sector took a massive hit on disappointing earnings. Kohl’s Q1 results also came in significantly below the Wall Street expectations last month. That’s why the American department store is now considering the lowered bid.
It is noteworthy, however, that the revised proposal from Franchise Group still translates to a 20% premium on Wall Street’s average price target of $50 a share on Kohl’s Corp stock that currently trades at a PE of 7.0.