Kohl’s Suitor Wants to Buy the Department Store Chain

Kohl’s is in talks to counteract activists and sell for about $8 billion. However, his suitor could pose new challenges to the department store chain.

Franchise Group Inc, which owns Vitamin Shoppe, Pet Supplies Plus, and other retailers, said it has entered a three-week exclusive negotiation period to acquire Kohl's for $60 per share. The franchise group said it would bring $1 billion, but most of the transactions are funded through the sale of Kohl's real estate.

Franchise Group, which mainly owns franchises, is smaller than Kohl's with a market capitalization of about $1.5 billion. The Franchise Group's proposed transaction structure - sale of real estate and increased debt - has caused problems for other retailers and is seen as the cause of the bankruptcy of Mervyn’s LLC, Shopko Corp., and Toys "R" Us Inc.

Kohl’s operates over 1,000 stores, most of which are located in strip centers. It owned 410 locations, leased 517 properties, and had ground leases on another 238 stores as of January.