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Kohl's (KSS) Acknowledges Takeover Offers, Shares Surge

Kohl's Corporation KSS saw its share price surging 36% on the bourses on Jan 24. The stock got a boost as investors welcomed takeover offers from private equity firm Sycamore Partners and Starboard Value-backed Acacia Research, per media reports. In a release, the department store retailer acknowledged that it has got letters expressing interest in acquiring the company and added that it would decide the course of action in the best interests of stakeholders. Kohl's did not disclose any names.

Last Friday, Acacia Research proposed approximately $9 billion, or $64 a share, in cash to acquire Kohl's, per sources. The offer price was roughly 37% higher than Kohl's closing price of $46.84 on Jan 21. Two days later, another potential bidder, Sycamore Partners offered to pay at least $65 per share. This reflected a premium of approximately 39% to the stock’s Friday’s close.

Per reports, activist investors such as Macellum Advisors and Engine Capital have been raising voices that Kohl’s management has not been doing enough to improve the company’s performance and enhance shareholder value. They even proposed to make changes in the board or review strategic options, including a sale.

Undoubtedly, Kohl's has been facing stiff competition from discount chains and other retail behemoths but the company has been taking steps to boost sales and profitability as it navigates the tough operating environment. The company has informed that its partnerships with Sephora and Amazon AMZN have boosted traffic in stores. The company has rolled out the first 200 Sephora at Kohl's stores and plans to open an additional 400 Sephora at Kohl's beginning in late spring 2022.

Incidentally, Kohl’s has been benefiting from the rollout of the Amazon Returns program nationwide. This facilitates Amazon customers to return merchandise to local Kohl’s stores free of charge and regardless of whether the items are packaged or unpackaged for shipping. Kohl’s performs the return process on behalf of Amazon customers. One of the primary objectives of this program is to convert more customers into loyal Kohl’s shoppers.

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Well, let’s wait and see how things will unfold, whether Kohl’s considers the takeover offer or chooses to be aggressive with its growth strategies. Kohl’s currently carries a Zacks Rank #3 (Hold). Shares of this Menomonee Falls, WI-based company have risen 24% in the past six months compared with the industry’s growth of 9.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Well, the news of buyout offers to Kohl’s also pushed the shares of Macy’s M, Dillard's DDS and Nordstrom JWN higher during the trading session on Jan 24. While Macy’s rose 18%, Dillard's and Nordstrom jumped about 14.7% and 13%, respectively. Market pundits cited that Kohl’s takeover offers have suddenly aroused investors’ interest in the department stores industry.

We note that shares of Macy’s and Dillard's have surged 55.1% and 42.8% in the past six months. However, shares of Nordstrom have declined 30.3% in the aforementioned period.

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