What happened
Shares of Kohl's (NYSE: KSS) were jumping today as the struggling department store chain took the next step in selling itself, with some potential offers reportedly ranging up to $62 a share.
At 11:10 a.m. ET, the stock was up 15%.
Image source: Kohl's.
So what
Reuters reported this morning that many of the potential bidders were considering lowering their buyout offer price given market conditions amid the pullback in retail stocks last week and the broad market this year. The wire service said that several bidders planned to lower their offer prices by 10% to 15%, though some were still considering bidding as much as $62 a share, a significant premium to the $42 at which it currently trades.
Among the bidders are Sycamore Partners, Franchise Group, Simon Property Group and Brookfield Asset Management (the mall REITs that took over JCPenney), and Acacia Research, which had offered $64/share for Kohl's back in January, though that offer was rejected.
Best and final bids are expected to come in within the next few weeks.
Now what
At this point, Kohl's should consider itself lucky to get an offer as high as $62, which would represent a 70% premium of its closing price last night. The company just reported declining sales and profits in its first-quarter earnings report and cut its outlook for the year, and the environment could get difficult for retailers as the Federal Reserve raises interest rates to tame inflation.
If the Reuters report is correct about the $62 share price, then its being bought looks like a no-brainer, but it's unclear if the company will be able to realize such a handsome premium in the current market environment. Based on the market's reaction today, investors aren't convinced.
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