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Kohl’s Breaks Off Sale to Vitamin Shoppe Owner

The department store chain has ended negotiations, but will likely face continued pressure to sell

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Courtesy of Kohl’s

Kohl’s (Menomonee Falls, NJ) won’t be changing hands anytime in the near future, marking a temporary halt in a months-long rollercoaster ride of negotiations for the department store chain.

The retailer has broken off talks to sell itself to Franchise Group, citing an unfavorable financing and retail environment that made the group’s latest offer “not fully executable or complete.”

The scuttled deal comes after Kohl’s announced in February that it rejected multiple takeover bids from unnamed suitors. In late-May, a report indicated a deal had “likely been extinguished”. Soon after, the retailer entered exclusive negotiations with Franchise Group.

Franchise Group, owners of Vitamin Shoppe and Buddy’s Home Furnishings, originally proposed to acquire the department store chain for $60 per share. On June 27, it cut its offer to $53 per share.

In a regulatory filing, Kohl’s said Franchise Group couldn’t secure “definitive financing arrangements to consummate a transaction, and the parties faced significant obstacles reaching a fully executable agreement.” As a result, Kohl’s board unanimously decided to end negotiations.

Peter Boneparth, Kohl’s Chairman of the Board, summed up the talks:

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“After engaging with more than 25 parties in an exhaustive process, FRG emerged as the top bidder and we entered into exclusive negotiations and facilitated further due diligence,” Boneparth said. “Despite a concerted effort on both sides, the current financing and retail environment created significant obstacles to reaching an acceptable and fully executable agreement. Given the environment and market volatility, the board determined that it simply was not prudent to continue pursuing a deal.”

Kohl’s also lowered its sales outlook for 2Q, another arrow in the quiver for the activist investors who are pushing for a sale. The company now expects sales to be down high-single digits for the period, as compared to its prior expectations of a low-single-digits dip relative to last year.

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