As it continues a proxy fight with activist investor Macellum Advisors, Kohl’s Corp. has issued a letter to shareholders on behalf of incoming chair Peter Boneparth in connection with the company’s May 11 annual meeting and its board of directors election.
Bonaparth continued to write:
Your board is taking the right steps to maximize value for all shareholders. We are recently refreshed, adding six independent directors in the last three years, including three who joined the board last year as part of the settlement with Macellum and other investors. We are also continuing to deliver on the strategy we unveiled in October 2020, which helped us achieve record EPS last year and allowed us to double our annual dividend to $2 per share for 2022. Additionally, as we previously disclosed, following the receipt of unsolicited bids earlier this year, your board has designated its finance committee to lead a robust and intentional process to explore strategic alternatives to maximize value with the assistance of Goldman Sachs.
I can attest to the fact that this is a thorough, disciplined process. To date, Goldman Sachs has engaged with over 25 parties. Select bidders who have put forward preliminary, non-binding proposals have been given access to a data room containing over 55,000 documents with more than 550,000 pages and they and their representatives have had due diligence meetings with management. As part of this process, your board is thoroughly testing Kohl’s standalone strategic plan against potential alternatives.
The next step is for interested bidders to put forward proposals with financing commitments and binding documentation. This board has been conducting a robust and thorough process and keeping this board in place will ensure the process is not disrupted or hindered. Your board’s focus throughout this process is choosing the path that maximizes shareholder value.
Bonaparth asserted that the board members proposed by Kohl’s have the proper experience to drive shareholder value given their retail, technology, e-commerce and brand management experience.
Macellum’s slate of board members is relatively unqualified, Bonaparte declared, adding:
Six of ten Macellum nominees have never served on a public company board, and none have served on a retail company board of comparable size to Kohl’s.
Several Macellum nominees are directly associated with bankruptcies and/or have overseen significant value destruction.
Only one of Macellum’s nominees has technology, e-commerce, or digital experience, a critical area to drive an omnichannel strategy within retail.
Macellum has taken a short-term focus throughout the course of its campaign and does not offer any proposals that would deliver long-term, sustainable value. Perhaps most concerning, Macellum appears to be advocating for a sale at any price. This was clear when Macellum criticized your board for rejecting an initial, unsolicited offer of $64 per share, despite publicly claiming that the Company was worth far more. We also find the close professional and personal ties Macellum CEO Jonathan Duskin has with many of his nominees compromise the true independence of his slate.
Jonathan Duskin’s short-term focus is further evidenced by his firm’s recent trading of Kohl’s securities. Macellum has sold Kohl’s stock in the low $60s over the last several months while saying the stock is worth at least $100 per share. Additionally, Macellum bought call options representing approximately 2.5 million shares of Kohl’s common stock just prior to public reports of the unsolicited expression of interest to buy Kohl’s. In the following trading days, Macellum sold most of these options.
Moreover, Mr. Duskin’s track record at other retailers has been disappointing for shareholders. Mr. Duskin served as director at four companies that declared bankruptcy either during or shortly after his tenure. Also, he advocated for a sale leaseback at Big Lots which reportedly thwarted a possible buyout from a private equity firm. Alarmingly, one board that Mr. Duskin served on publicly stated that he inhibited their ability to increase shareholder value. It’s clear that Mr. Duskin’s short-term approach makes him unfit to serve on the Kohl’s board.
Rumored bidders for Kohl’s include Hudson’s Bay Co. and the Simon Properties and Brookfield duo of mall owners that operates JCPenney.
