There’s plenty going on behind the scenes in retail right now.
Simon x Brookfield
Simon Property Group (SPG) and Brookfield Properties reportedly offered $8.6 billion for Kohl’s, according to The New York Post on Monday.
The mall landlords’ $68-a-share bid comes in nearly 19 percent over Friday’s $57.36 closing share price for Kohl’s but still lagging previous offers pegged at $69 to $70 a share valuing a deal around $9 billion. Franchise Group, Hudson’s Bay and Sycamore Partners are said to have submitted offers, while Acacia Research kicked off this entire cycle of wheeling and deal with Sycamore following on its heels. Macellum Advisors and Engine Capital have accused Kohl’s and its management team of failing to create shareholder value. The former wants to shake up the board, while the latter is more interested in Kohl’s getting sold.
Kohl’s investment bankers might be able to convince contenders to rework their offers to come in closer to $75 a share and higher. Some believe the retailer could get between $75 to $85 a share if management makes good on its goals. Private equity firm Leonard Green & Partners is working with a group including Authentic Brands Group on its own bid, reports indicate.
Kohl’s bankers and board will want a buyer that would preserve the leadership and let its transformation work continue.
That’s not exactly what happened when Simon and Brookfield purchasing JCPenney’s operating business out of bankruptcy. They dismissed former CEO Jill Soltau in 2020 and didn’t replace her until November last year when they brought in Levi’s and Walmart alum Marc Rosen.
Though JCP has invested in a range of private label brands spanning multiple categories and brought in powerhouse ABG brands including Juicy Couture and Forever 21, some believe it should be doing more to compete with rivals such as Macy’s.
Despite Kohl’s staying bullish on its Sephora partnership, a Simon-Brookfield deal would likely scuttle its plan to roll out hundreds of shop-in-shops, The New York Post reported on Monday.
Meanwhile, ABG is said to be in the running to scoop up Ted Baker with some help with deep-pocketed private-equity backers.
The brand manager is reportedly working with Leonard Green & Partners, Lion Capital and General Atlantic to put together a bid.
Sycamore Partners Management, the U.K. arm of U.S.-based private equity firm Sycamore Partners, first drummed up interest in Ted Baker, which shortly after officially put itself up for sale after multiple offers rolled in. An ABG spokeswoman declined to comment.
Ted Baker is believed to be in preliminary talks at least three potential buyers, one source said. Contenders won’t have improve on their non-binding offers for several more weeks when formal proposals are due.
After Nitin Passi’s exit last week from his role as Missguided founding CEO and Teneo’s restructuring team stepping in to look at the company’s options, JD Sports Fashion plc could be once again eyeing the fast-fashion e-tailer.
Last year JD Sports wanted a controlling interest when it flirted with investing in the financially strapped rival to Boohoo and Fashion Nova. A spokesman for JD Sports declined comment.
Sources say the global investment community is sitting on nearly $3.5 billion in money earmarking for deal-making, a considerable leap over the $300 billion tallied at the end of 2020. The U.S. alone has roughly $1.25 trillion to $1.60 trillion in available M&A funds.
Troutman Pepper’s M&A team wrote on the law firm’s blog that mergers and acquisitions are likely to “remain hot” this year given all of the money at the ready when a deal comes along.
Barclays co-head of global M&A Ihsan Essaid believes this year’s M&A volume should match 2021 when deals totaled roughly $5.9 trillion. He listed in a blog post several reasons behind his outlook for “robust” M&A activity, pointing to CEO and board confidence in their companies’ business and strategic prospects. He also cited technological disruption and innovation, and said credit and equity markets and monetary policy both encourage deal-making activity.
Though technology, industrials and healthcare are projected to see the most M&A, fashion and retail are right there in the mix. Essaid expects that financial sponsors will use their $2 trillion in resources to dominate global M/A global.
On the other hand, private equity players aren’t exactly known for their willingness to pay up, even for companies that are worth it. Strategic buyers are usually looking for synergies such as a dress producer buying a company known for tops, for example. Financial buyers might prioritize expansion and typically have their eye on an exit strategy like going public or selling to another acquirer.