The Ohio-based Franchise Group has entered exclusive negotiations to purchase Kohl’s for nearly $8 billion, or $60 per share, marking the year’s biggest retail acquisition, should the deal come to fruition.
In the three years since investor Brian Kahn founded the firm, Franchise Group has bought up a collection of franchise-based brands it believed were ripe for strategic improvement, according to Forbes. Its portfolio includes The Vitamin Shoppe, Sylvan Learning, and Pet Supplies Plus, among others, and it has conducted acquisitions worth between $81 million and $550 million, according to PitchBook. It was originally founded as the parent company of two seemingly very different brands: Liberty Tax and Buddy’s Home Furnishings.
Kohl’s, whose stock is down about 20% since May, saw 2021 revenues of $19.4 billion. Shares of the Wisconsin-based Kohl’s climbed 7% on news of the acquisition, taking the retail chain’s market cap to about $5.8 billion. Franchise Group, meanwhile, reported about $3.3 billion in revenue in 2021.
Kohl’s has been pushed, recently, to sell. Hedge fund Engine Capital sent a letter to the Kohl’s board in December suggesting it put itself up for sale or spin off its online business. A month later, hedge fund Macellum Advisors also called for the retailer to sell. In February, according to Forbes, Kohl’s brought on investment banks to initiate a potential sales process.
Oak Street Real Estate Capital is helping to finance the current deal, according to CNBC. Oak Street is a unit of Blue Owl Capital that specializes in helping companies monetize their real estate through triple-net leases, which is a type of lease where tenants pay all taxes and upkeep costs, creating a steadier revenue stream for investors.