Retailer Kohl's (KSS) has been approached with not one but two different takeover bids, according to media reports.
Over the weekend, Bloomberg reported that Kohl’s has been approached by private equity firm Sycamore Partners about a potential takeover. It is unclear how much Sycamore is willing to pay for the company.
Acacia Research, which has less than a 5% stake in Kohl’s, offered $64 per share for the company, Bloomberg reported.
But a third potential suitor, Amazon (AMZN), could make a lot of M&A sense.
To be clear, there is no indication that the Seattle e-commerce giant is interested in making a move on the Menomenee Falls, Wis., department-store chain. But the potential synergies between the two companies could make for an interesting deal.
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Why Amazon as a Possible Suitor for Kohl's?
Amazon is currently looking to strengthen its brick-and-mortar footprint and also improve its last-mile-delivery operations. The purchase of Kohl's could potentially kill the two birds with one stone, according to Morningstar analyst David Swartz.
"The benefit of owning Kohl’s would be its store count. They aren’t located in malls, so they wouldn’t have the problem from dying malls. And Amazon could use them as fulfillment centers," Swartz told TheStreet Monday.
"One of Amazon’s biggest problems has been the last mile of delivery. Owning Kohl’s could bring them closer to customers, especially in smaller cities that may not have a fulfillment center close."
The two companies have a partnership, which started in September 2017. Kohl's said then that 82 stores across Los Angeles and Chicago would offer free returns for Amazon customers.
“This is a great example of how Kohl’s and Amazon are leveraging each other's strengths – the power of Kohl’s' store portfolio and omnichannel capabilities combined with the power of Amazon’s reach and loyal customer base," Richard Schepp, former chief administrative officer of Kohl's, said at the time.
As of 2021, Kohl's now accepts Amazon returns at nearly. 1,200 locations. The company has credited Amazon with helping push foot traffic to its stores.
Kohl's Chief Executive Michelle Gass said that it added at least 2 million customers in 2020 thanks to the Amazon partnership.
The ties between the two companies have grown since 2017, but not without some pushback.
In February 2021, an activist group that included Macellum Advisors, Ancora Holdings, Legion Partners Asset Management, and 4010 Capital said it took a 9.5% stake in Kohl's. The group said then that the deal with Amazon was "costly" and mentioned the retailer's own "private label failure."
Amazon Has a Problem Kohl's Can Solve
For all its prowess in online retail, Amazon has plenty of brick-and-mortar presence.
Last week, Amazon said that it would open Amazon Style, its first-ever physical apparel store, at an upscale mall in suburban Los Angeles.
The planned 30,000-square-foot store will feature women's and men's apparel, shoes, and accessories. The store is expected to open later this year.
Amazon will use machine learning algorithms to produce tailored, real-time recommendations for every customer as they shop.
Shoppers will be able to use an app to scan items' QR codes to see sizes, colors, overall customer ratings, and other details.
Amazon has launched the store partly to show off its many owned-and-operated (O&O) clothing lines. The online retailer has struggled to get traction with these brands because people tend to not buy clothes they've never seen in person. That's especially true for underwear and bathing suits -- clothing areas where Amazon owns multiple brands.
Target (TGT) has had great success with its O&O clothing brands because it can show them off in its stores. Buying Kohl's would give Amazon a place to display its many clothing lines which would also help Kohl's refresh its tired merchandise mix.
