Kohl’s disappointing financial results have raised concerns that the company’s auction to sell itself will be a bust — even if management continues to spark strong interest by potential suitors, The Post has learned.
Bids are due in “the coming weeks,” Kohl’s confirmed Thursday after delivering a disappointing first quarter in which it downgraded its profit and sales outlook for the year and said consumers are pulling back on their spending, which Resulting in a 5.2% comparable sales decline compared to a year ago
Analysts were expecting a 0.5% increase in sales — and so did potential bidders.
“I was shocked by the results,” said a source close to the sales process, adding, “I don’t believe any acceptable bids will be offered anymore.”
Kohl’s stinky quarter has been compounded by turmoil in financial markets.
“No one is signing up to finance the mega merger anymore,” a loan source at one of the largest banks told The Post. “There is no market.”
The banker said banks are afraid to lend money against any company in highly leveraged deals.
Earlier this year, Kohl’s rejected a $9 billion offer from Starboard Value LP, which wanted to buy the company for $64 per share, or a 37% premium. Kohls said it was too low, and adopted a so-called poison pill to prevent active investors from acquiring more than 10% of its shares.
Now, enthusiasm for the deal has extinguished, sources told The Post, partly due to a lack of transparency from Kohl’s.
Last week, Kohls won a proxy battle to replace 10 of its directors. But if he had known about the company’s recent performance, he would not have confirmed to the board.
“Basically the company knew their results were bad and didn’t tell anyone and got a shareholder vote for their board of directors,” said a source close to the sale process.
The company has said that there are at least 25 interested parties. The most prominent bidders included Canadian department store Hudson’s Bay Company, shopping mall giant Simon Property and Canada-based Brookfield Asset Management — which offered $8.6 billion as The Post reported — and private equity giants Sycamore Partners and Leonard Green & are partners.
Kohl’s chief executive, Michelle Gass, said Thursday that the company is “pleased with the number of parties recognizing the value of our business and plan.”
The retail chain only reluctantly agreed to begin the sale process when active investor McCallum Advisors first prompted the company to do so in January. But sources tell The Post that the Wisconsin-based company may be vesting privately for an outcome in which bidders turn away — public image management notwithstanding.
Still, others say the sale is still viable but at a greater discount.
Potential buyers may lower their bids, but the company is such a lucrative acquisition — one that includes a valuable real estate portfolio — that a lousy quarter doesn’t come undone, another source said.
On Thursday, Kohl’s shares closed at $45.04 — well up from its $63.11 price two months ago.
Kohl’s did not immediately respond for comment.