Simon Property (NYSE 🙂 Brookfield Asset Management Inc (NYSE:) have apparently made a bid for a purchase Kohls Corp (NYSE) A deal which could see the retailer of department stores valued at over $8.6 billion.

According to the New York Post, the bidders have offered to pay $68 per share to buy Kohl’s, driving the company’s shares up 5.3% yesterday to $60.39.

Brookfield Asset Management and Simon Property also own Texas’s department store JCPenney. They helped to avoid bankruptcy in December 2020.

JCPenney would retain two distinct brands while streamlining and reducing costs. If the deal is successful, JCPenney shareholders will be able to continue operating them. The two firms intend to reduce Kohl’s costs by $1 billion over the following three years, according to the report.

Kohl’s put itself on the market earlier this year after being pressured by activist investors Engine Capital and Macellum who were displeased with the direction in which the company was going.

Apart from Simon Property and Brookfield, private equity firms Sycamore Partners and Leonard Green & Partners are also interested in buying the department store chain.

If the companies come to an agreement, Simon and Brookfield would likely run JCPenney and Kohl’s through a single management team and would merge the IT systems into one managing unit.

According to reports, private clothing would also be manufactured by one brand.

Michael Goldsmith from UBS says SPG was aggressive in buying KSS.

“This is in contrast to SPG’s other acquisitions, which we believe were much more defensive in nature. The company had acquired banksrupt retailers before, which gave the company more control or allowed them to retain occupancy. This is not true in the present offer. We believe that a deal with SPG would focus more on SPG’s ability and potential exposure to other real estate. SPG is not expected to win, as 25+ people have been involved with the seller. But SPG’s interest sends a message that it continues to broaden its operating scope, as we see it,” Goldsmith said in a client note.

Kimberly C Greenberger from Morgan Stanley also shared her thoughts on these reports.

“In our view, a $68/sh sale price would imply a value that is within 6% of our Bull case outcome. However it is unclear whether or not the Board is actually open to a sale, and it is also unclear why shareholders are being asked to vote on this Board slate at the May 11th Annual Meeting without first knowing the outcome of a potential sale process… While we are not aware of any potential transactions and KSS has not commented on recent media reports, given the implied premium of the reported offer by SPG and BAM and its challenging fundamentals, we think the stock could see some downward pressure, hovering near our $42 DCF-driven base case price target, should the Board decide against a potential sale or absent a notable change in trends or strategy; we stay Underweight,” Greenberger wrote in a note.

By Senad Karaahmetovic