US-based holding company Franchise Group is planning to lower its bid for department store chain Kohl’s to around $50 a share from approximately $60, CNBC has reported.
The company is also understood to be assessing whether the acquisition would be the best use of its capital, as well as preparing financing with its lenders.
Earlier this month, Franchise Group entered a three-week exclusive negotiation period with Kohl’s over the potential deal.
The negotiation period is due to end later this week.
Franchise Group had offered $60 a share in cash to acquire Kohl’s, valuing the department store chain at nearly $8bn.
At the time of entering the negotiation period, Franchise Group said: “There can be no assurance any transaction will result from the ongoing discussions with Kohl’s Corporation.
“Franchise Group does not intend to make any additional comments regarding these discussions unless and until it is appropriate to do so, or a formal agreement has been reached or transaction discussions are terminated.”
Reuters reported that Franchise Group is in talks to retain Kohl’s senior management team, including its CEO Michelle Gass, if the planned sale is finalised.
Executives of the holding company are understood to have expressed confidence in Gass and members of her management team.
Sources noted that Franchise Group tends to buy businesses that already have operating teams in place, as opposed to bringing in new management teams.
Neither Franchise Group nor Kohl’s responded to Reuters’ queries.
Last month, Kohl’s reported its earnings for the first quarter (Q1) of the fiscal year 2022 (FY22), which showed that its quarterly revenue declined by 4.4% to $3.71bn on a year-over-year basis.
Franchise Group recently completed the sale-leaseback of all three of its WS Badcock Corporation (Badcock) distribution centres.
The distribution centres were sold to affiliates of Oak Street Real Estate Capital for around $150m.