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Kohl’s Board Battle: Why Financier Linked to 2 Fashion Bankruptcies Is Fighting for Seat at the Table

Activist investor Macellum Advisors hurled a last-ditch attack at Kohl’s and its board Monday just two days before shareholders will cast their ballots to elect the retailer’s next director slate.

The three-pronged blitzkrieg comes after proxy advisory firm Glass Lewis sided with Kohl’s board nominees, while advisory rival ISS issued a split decision giving points to both Macellum and the Menomonee Falls, Wisc.-based retailer.

With time running out, the New York City hedge fund is pulling out all the stops.

“We struggle to see any scenario where the company’s capital-intensive and risky plan, which projects declining EBIT (earnings before interest and taxes) and increasing capital expenditures, will result in anything close to recently reported offers, even three years from now,” Macellum managing partner Jonathan Duskin wrote to shareholders, panning Kohl’s plan to sell itself at a cost of $75 to $88 per share. Kohl’s stock price tumbled more than 7 percent in mid-day activity Monday, trading at $51.75 a share.

Duskin also didn’t hold back when he insinuated that Kohl’s refuses to share its first-quarter earnings report ahead of the meeting in order to keep less-than-rosy results away from ballot holders.

“Underperformance in the first quarter of 2023, after a weak fourth quarter in fiscal 2022, would be more validation of a strategy that is not working,” said Duskin, who once served as head of product management and chairman of the investment policy committee within the research department at Lehman Brothers Inc., the defunct investment firm whose collapse helped trigger the Great Recession. “If true, weak performance could result in lower take-private prices that may not meet with the board’s already unrealistic expectations. In this case, shareholders should want objective, unbiased voices on the board to ensure expectations are level set.”

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Duskin went on to accuse Kohl’s of holding its annual meeting this month instead of in July because the timing means it won’t have to share what the Goldman Sachs-led sale process has actually yielded, if anything at all.

“This lack of transparency goes to the heart of why Macellum nominees should be added to the Board at this critical time,” said the Citi Trends board member, who has previously served on the boards of Christopher & Banks and Wet Seal, both of which have filed for bankruptcy in the past seven years.

A spokeswoman for Kohl’s countered the hedge fund’s salvo by saying the retailer is “pleased with the broad support it has received from its shareholders.”

The representative went on to reiterate that Kohl’s continues to fully explore all options “in the best interests of all shareholders,” adding that preserving the current board “will ensure the process is not disrupted or hindered.”

Kohl’s has a number of contenders that could put in firm offers. Simon Property Group and Brookfield Partners could team up on a robust bid. Authentic Brands Group, part of a consortium led by one of its investors, Leonard Green & Partners, is also said to be in the mix. Then there’s Franchise Group, Hudson’s Bay Co., Sycamore Partners and Acacia Research, which is backed by activist investor Starboard Value and was the first one to push for Kohl’s to sell itself when it made its $9 billion non-binding offer in January.

Early non-binding offers from Acacia and Sycamore were in the range of $64 to $65 a share, although more recent interest was around $69 to $70.