Simon Property’s $8.6 Billion Bid to Buy Kohl’s Seen as an ‘Aggressive’ Move
2022.04.26 16:02
Simon Property’s (SPG) $8.6 Billion Bid Kohl’s (KSS) Seen as an ‘Aggressive’ Move
Simon Property (NYSE:SPG) and Brookfield Asset Management Inc (NYSE:BAM) have reportedly put forward a bid to buy Kohls Corp (NYSE:KSS) in a deal that could value the department store retailer at more than $8.6 billion.
According to the New York Post, the bidders have offered to pay $68 per share to buy Kohl’s, driving the company’s shares up 5.3% yesterday to $60.39.
Simon Property and Brookfield Asset Management also own the Texas-based department store company JCPenney, which they helped avoid bankruptcy in December 2020.
If the deal goes through, JCPenney owners would continue running two separate brands while streamlining operations and reducing costs. The two firms intend to reduce Kohl’s costs by $1 billion over the following three years, according to the report.
Kohl’s put itself on the market earlier this year after being pressured by activist investors Engine Capital and Macellum who were displeased with the direction in which the company was going.
Apart from Simon Property and Brookfield, private equity firms Sycamore Partners and Leonard Green & Partners are also interested in buying the department store chain.
If the companies come to an agreement, Simon and Brookfield would likely run JCPenney and Kohl’s through a single management team and would merge the IT systems into one managing unit.
Furthermore, all private apparel would be produced by a single in-house brand, the reports say.
UBS analyst Michael Goldsmith says SPG made an aggressive move to acquire KSS.
“This is in contrast to SPG’s other acquisitions, which we believe were much more defensive in nature. In the past, it acquired retailers in bankruptcy that allowed the company to maintain occupancy or give it more control of real estate attached to its properties. That is not the case in this offer. As such, we believe a deal would be more focused on SPG’s ability to better operate KSS, gain greater exposure to off-mall real estate, and redevelopment of these shopping centers. It’s not clear if SPG will win the bid as the seller has engaged with 25+ parties. But SPG’s interest sends a message that it continues to broaden its operating scope, as we see it,” Goldsmith said in a client note.
Morgan Stanley analyst Kimberly C Greenberger also reflected on the recent reports.
“In our view, a $68/sh sale price would imply a value that is within 6% of our Bull case outcome. However it is unclear whether or not the Board is actually open to a sale, and it is also unclear why shareholders are being asked to vote on this Board slate at the May 11th Annual Meeting without first knowing the outcome of a potential sale process… While we are not aware of any potential transactions and KSS has not commented on recent media reports, given the implied premium of the reported offer by SPG and BAM and its challenging fundamentals, we think the stock could see some downward pressure, hovering near our $42 DCF-driven base case price target, should the Board decide against a potential sale or absent a notable change in trends or strategy; we stay Underweight,” Greenberger wrote in a note.
By Senad Karaahmetovic
