The battle for control of Kohl’s Corp. continues to heat up, with a decisive shareholders’ meeting just six weeks away and bids to acquire the company being evaluated.
On Thursday, Kohl’s sent a strongly worded letter to shareholders defending its 13 board members up for reelection and characterizing Macellum Advisor’s activist agenda for Kohl’s as “hollow.”
Macellum, which holds 5 percent of Kohl’s shares, wants to overhaul the retailer’s board and has proposed 10 candidates, including its founding partner, Jonathan Duskin.
Macellum contends Kohl’s management and board have failed to generate sufficient shareholder value and could through sale-leasebacks of real estate, or possibly splitting the dot-com and store operations into separate businesses. Macellum has also argued that Kohl’s has been underperforming competitors in the retail sector. Last year, the retailer generated $19.43 billion in volume.
But in its letter, the Menomonee Falls, Wisc.-based Kohl’s stated: “Macellum’s slate lacks the right skills and experience — six of 10 nominees have never served on a public company board,” and that Macellum presents “no value-enhancing ideas and has a short-term focus.”
Kohl’s also told shareholders that its board is “running a robust and intentional process to evaluate interest from multiple parties” seeking to acquire the company. Hudson’s Bay Co., Sycamore Partners, Starboard Value’s Acacia Research Corp. and Leonard Green & Partners are said to be among the bidders.
“Your board, working closely with Kohl’s management team, has acted decisively to put the company on a new trajectory for improved growth and accelerated profitability. Since announcing our new strategy in October 2020, Kohl’s has made substantial progress in transforming our business, achieving record earnings per share in 2021. Total shareholder returns have been 146 percent from Oct. 19, 2020 through Jan. 21, 2022,” Kohl’s wrote.
In January, the Kohl’s board and its finance committee — comprised solely of independent directors including a designee from Macellum — brought in Goldman Sachs to engage with bidders. Sources told WWD that it will be weeks, possibly a couple of months, before a determination is made to accept a bid, or not accept any.
Kohl’s pointed out that six independent directors were added in three years, including the three that joined Kohl’s board last year as part of the company’s settlement with Macellum.
The company said sale-leasebacks of the store real estate, which Macellum wants, are typically “inefficient” ways of accessing capital. Kohl’s noted that Macellum previously urged Big Lots to pursue sale-leasebacks, Big Lots followed through on it and then saw a meaningful decline in operating margin.
Additionally, Kohl’s contended that Macellum misled investors by focusing on Kohl’s stock performance on the day of its recent investor day that corresponded with a global market decline driven by heightened concerns of war in Ukraine and a surge in global oil prices. “Regarding our go-forward strategy as articulated in our fourth-quarter earnings and investor day, we have received positive feedback from shareholders and analysts, and the average analyst estimate for Kohl’s 2022 EPS has increased by 10 percent since those two events,” Kohl’s wrote.
The retailer’s annual meeting of shareholders, when the votes on board members are tallied up, is scheduled for May 11.
Macellum’s nominees, aside from Duskin, are Pamela J. Edwards; Stacy Hawkins; Jeffrey A. Kantor; Perry M. Mandarino; Cynthia S. Murray; Kenneth D. Seipel; Craig M. Young; George Brokaw, and Francis Ken Duane.
The 13 members of Kohl’s existing board are Michael Bender, Peter Boneparth, Yael Cosset, Christine Day, Chuck Floyd, Margaret Jenkins, Thomas Kingsbury, Robbin Mitchell, Jonas O. Prising, John E. Schlifske, Adrianne T. Shapira, Stephanie Streeter, and Michelle Gass, the chief executive officer of Kohl’s.