Retailer Kohl’s (KSS) has drawn interest from several potential suitors recently and traders could benefit from the rumors, Stephen “Sarge” Guilfoyle argues.
The company has a decent balance sheet, provides a 2.1% dividend yield and has a tangible book value per share of $34.73, Guilfoyle noted. Before the takeover talk surfaced in mid January, shares traded at only1.25 times tangible book compared to its competitors. Dillard's (DDS) traded at 2.89 times tangible book and Macy's (M) trades at 3.93 times tangible book.
Several potential bidders for Kohl’s have been named in the media recently, pushing up its share price.
“Given that I had to cease [trading] while I wrote this note, I see no reason not to try to ride this out and see what develops,” he wrote in a recent Real Money Pro column. “Where there is smoke, there usually is some fire.”
The company’s stock was undervalued for “some time” given that it has a working arrangement with Amazon (AMZN) to handle returns, Guilfoyle wrote.
The media had mentioned several potential suitors. A group led by Acacia Research (ACTG), which is controlled by activist hedge fund Starboard Value, made a $9 billion ($64/share) offer or a 35% premium to the stock's last sale the Wall Street Journal reported.
Meanwhile, The Deal reported that Oak Street Real Estate wanted to buy the real estate owned by Kohl's minus the retail stores for $6 billion. Another buyout rumor emerged with private equity firm Sycamore Partners as a potential bidder, according to Bloomberg News.
Engine Capital, an activist investor, told Kohl’s in late 2021 that the company should either sell itself or spin off its online business. They sent Kohl’s a letter urging that it take the offer from Acacia seriously. After several takeover offers, The Deal reported that Kohl's had retained Goldman Sachs as an advisor.
Kohl’s has always been an attractive asset for a suitor, Guilfoyle argues.
“I always thought Kohl's was for sale, I just always thought it would be Amazon, as Amazon delves deeper into brick and mortar retail,” he wrote.
