Sam Boughedda

Kohl’s (NYSE 🙂 earlier this week announced that it was in exclusive discussions with Franchise Group (NASDAQ :), a retailer holdings company to acquire the stock at $60 per share.

Oliver Chen from Cowen stated in a note that they believe it is more probable than not to close a deal depending on risks factors. The deal could close at 60 percent to 40% of its probability, according to Chen.

Chen did however estimate that there was a 40-60% chance that the deal would be completed and stock prices of $36 each share.

We believe FRG was diligent in securing financing, based on comments from its 1Q earnings conference. FRG also believes cultural compatibility is a key factor. This has been considered in the 3 previous acquisitions made during FY21. FRG’s potential ability to close the deal, and thus initiate a sale leaseback for Kohl’s real-estate portfolio, are the main factors that investors fear. That’s approximately $8bn (or roughly $8bn according to Cowen’s estimated est.Chen said that.

Analyst acknowledged that potential price breaks are a factor to take into consideration.

He said that FRG management had successfully completed 3 acquisitions during FY21. Additionally, FRG continued to implement a growing profit strategy via synergies across its portfolio and franchising.

Chen said that Kohl’s fit well in FRG’s core strategy of a $1bn FCF business offering a variety of products to diverse customers.