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An Activist Investor Is Nominating 10 Directors to the Kohl’s Board to Fix the Business

Kohl’s is going head-to-head with one of its investors.

Macellum Advisors GP, LLC, which holds almost 5% of outstanding common shares at Kohl’s, said that it will nominate ten candidates for election to the company’s board of directors at the annual shareholder meeting this year.

The announcement comes shortly after Kohl’s rejected two offers from two firms looking to acquire the company, an action Macellum strongly supported. In rejecting the offers, Kohl’s stated that they did “not adequately reflect the Company’s value in light of its future growth and cash flow generation.”

Kohl’s also instituted a “limited-duration shareholder rights plan” to help the company avoid an unwanted takeover, which is effective until February 2023.

“We are convinced – now more than ever – that a majority of the company’s Board needs to be refreshed,” Macellum wrote in an open letter. “The Board’s decision to hastily reject at least two recent expressions of interest to acquire the Company, both of which included sizable premiums, suggests it is no longer operating with impartiality and objectivity.”

Kohl’s said Macellum’s most recent actions were “unjustified and counterproductive.” Macellum entered into a settlement with Kohl’s last year, which involved two board seats and other changes. Recently, Macellum has said it believes that more shareholder representation is crucial to help Kohl’s do better. The investor also said it supports a move for the company to separate its digital and brick-and-mortar businesses into two separate entities, a recently popular move among traditional department store retailers.

Led by Jonathan Duskin, Macellum has been publicly critical of Kohl’s management for months. In January, Macellum sent an open letter to other shareholders to call out Kohl’s for “mismanaging” the business and “failing to implement necessary operational, financial and strategic improvements.” 

The letter said Kohl’s had “produced some of the worst revenue numbers in its retail peer group since the economy began reopening in 2021.”

Macellum is not the only investor to pressure Kohl’s to make changes in recent months. In early December, investor Engine Capital LP, which owns 1% of outstanding shares at Kohl’s, asked the company to separate its physical store business from its e-commerce business. Engine also asked the company to run a market test to determine how much certain financial sponsors would pay per share for the company.“Given leadership’s failure to create value through operational excellence and strategic initiatives over long periods of time, it is time for the Board to accept the fact that the public market is not appreciating Kohl’s in its current form,” wrote Engine in the letter. “Even the most patient long-term shareholders cannot be expected to endure the punishing underperformance and perpetual value disconnect seen at Kohl’s.”
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