Franchise Group Inc. in negotiations to add Kohl’s to portfolio

2022.06.20

DELAWARE, Ohio — Franchise Group Inc., owner of Top 100 brands American Freight and Badcock Home Furniture & more, has entered into a three-week exclusive negotiation period to acquire Kohl’s Corp. for $60 per share in cash.

If Franchise Group and Kohl’s Corp. enter into a definitive agreement, Franchise Group intends to contribute approximately $1 billion of capital to the transaction, all of which is expected to be funded through a corresponding increase in the size of its secured debt facilities. A majority of the financing for the transaction is anticipated to be provided on the basis of the real estate assets of Kohl’s Corp. Other than the increased secured debt facilities of Franchise Group, none of the financing for the transaction is expected to be recourse to Franchise Group.

In April, it was reported that Franchise Group was offering up to $69 per share to acquire the mid-tier department store chain, which operates more than 1,100 stores.

In a release announcing the negotiating window, Franchise Group, which also owns lease-to-own retailer Buddy’s Home Furnishings, The Vitamin Shoppe, Pet Supplies Plus and other retail chains, said it remains committed to its conservative financial policies, including target leverage levels and maximizing free cash flow generation. If a transaction is completed, it is anticipated that the free cash flow, adjusted EBITDA and non-GAAP EPS of Franchise Group would significantly increase. The significant increase in free cash flow generation is expected to further Franchise Group’s objective of increasing dividends and other capital return to shareholders, while also enabling Franchise Group to accelerate continued organic and inorganic investments.

In the release, Franchise Group noted that there can be no assurance any transaction will result from the ongoing discussions with Kohl’s Corporation, and that it 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.