Kohl’s Initiates ‘Poison Pill’ Plan to Head off Takeover

Kohl's believes recent takeover offers do not reflect the company’s value and has adopted a shareholder rights plan, also known as a "poison pill."
Jamie Grill-Goodman
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Kohl's announced Friday that following a review by independent financial advisors the department store retailer believes recent takeover offers do not reflect the company’s value, considering its future growth and cash flow generation.

Kohl’s also said it has adopted a shareholder rights plan effective immediately. Also known as a “poison pill,” the move arms it against a hostile takeover. The plan expires on February 2, 2023.

The rights plan has been adopted so Kohl’s board of directors can conduct an orderly review of expressions of interest, including potential further engagement with interested parties. The rights plan does not preclude Kohl’s from considering an offer that recognizes the value of the company.

Last month, the retailer received an unsolicited offer that valued it at around $9 billion. A group led by Acacia Research Corp., which activist hedge fund Starboard Value LP controls, offered $64 a share in cash, while Sycamore Partners reportedly reached out to Kohl’s about another deal.

“We have a high degree of confidence in Kohl's transformational strategy, and we expect that its continued execution will result in significant value creation,” said Kohl’s chairman Frank Sica said in a statement. “The board is committed to acting in the best interest of shareholders and will continue to closely evaluate any opportunities to create value.”

Kohl’s has designated its finance committee, comprised of independent directors, to lead the ongoing review of any offers. The retailer has also engaged financial advisors, including Goldman Sachs and PJT Partners, and have asked Goldman Sachs to engage with interested parties.The board will “continue to pursue all reasonable opportunities to drive value.”

The shareholder rights plan will be exercisable only if a person or group acquires beneficial ownership of 10% (or 20% in the case of passive institutional investors) or more of the company’s outstanding common stock. In that event, existing investors will be entitled to purchase additional shares at a 50% discount. Existing holders are grandfathered at their current ownership levels but are not permitted to increase their ownership without triggering the rights plan.

Kohl’s said it will update shareholders on its ongoing strategic initiatives and capital allocation plans at Kohl’s Investor Day on March 7, 2022.