Why the Kohl’s Sale Deal Isn’t Over

There’s a big difference between being for sale and somebody trying to buy you.

It’s a distinction that Kohl’s may find out the hard way.

Last week the quasi-department store retailer announced it had ended talks with a potential suitor, The Franchise Group, and that it was no longer for sale. This followed an extended period of upheaval for the chain stretching back to last winter that saw as many as 25 companies express an interest in writing a check and going home with Kohl’s.

Kohl’s says it’s not for sale, but others may believe otherwise.

The Franchise Group, which owns Vitamin Shoppe and several home furnishings banners, was selected as the prospective buyer by Kohl’s management but essentially the deal was never a fit on several levels. For one, Kohl’s was bigger than Franchise and then there’s the fact that Franchise – as its name suggests – was in the business of franchising its nameplates and had little experience actually running retail businesses.

Once its initial offer of $60 a share was reduced to $53, Kohl’s had the grounds to call the whole deal off and take down its For Sale sign.

Hmmmmm. One could almost make the case that the reason Kohl’s selected Franchise in the first place was because it knew the deal would never happen and that they were possibly the acquirer least likely to succeed. It’s a distinctly Machiavellian thought but, hey, it’s possible.

So Kohl’s management now says it will work to bring “shareholder value” in other ways, possibly through the same real estate asset sales that Franchise was suggesting…and that just about everybody outside of these two companies thought was a really rotten idea. They also said they would continue to rebuild Kohl’s business through merchandising initiatives, a process that has produced little in the way of boosts to the company’s stock price. Which, by the way, is off more than half from its year-to-date high and is now way, way below any of the suggested target purchase prices.

But what about the other 24 potential buyers still sitting out there? Let’s not forget that this entire process was not exactly Kohl’s idea to begin with. It was outsiders – private equity players, real estate developers, other retailers and who-knows-who-else – who got this conversation started in the first place. They haven’t gone away and in fact at $27 a share Kohl’s could be a real bargain, its book price at barely $3.5 billion right now, chump change for many of these possible buyers.

If saying you’re no longer for sale was all it took to end corporate takeovers, the business world would be a different place. Literally thousands of companies would still be independent and not part of endless Engulf-and-Devour conglomerates.

Simply put, the saga of who will own Kohl’s is probably not over…far from it. While retailers are falling off the radar these days as acquisition targets there are always companies interested in them. Even with interest rates climbing, there’s still plenty of money out there chasing deals.

What’s the old saying about “It ain’t over until it’s over?” The fat lady may just be getting warmed up on the Kohl’s stage.

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