Oh Lord, here we go again. A private equity company is seeking to buy Kohl’s by piling on debt. Does this sound familiar? It certain does to The Wall Street Journal which led with this headline:
Kohl’s Suitor Wants to Buy the Chain by Selling Kohl’s Properties
Franchise Group seeks to finance its $8 billion bid using a strategy that failed for Toys ‘R’ Us and others“Kohl’s Suitor Wants to Buy the Chain by Selling Kohl’s Properties,” Suzanne Kapner, Wall Street journal, june 8, 2022
It was, of course, the second sentence in the headline that caught my eye. Why do we allow private equity firms to buy companies on these kinds of terms? Here is how the article puts it:
The deal structure that Franchise Group is proposing—selling real estate and adding on debt—has caused problems for other retailers and was seen as contributing to the bankruptcies of Mervyn’s LLC, Shopko Corp. and Toys “R” Us Inc.“Kohl’s Suitor Wants to Buy the Chain by Selling Kohl’s Properties,” Suzanne Kapner, Wall Street journal, june 8, 2022
Kohls is headquartered in Wisconsin and people there are worried by the proposed deal. Senator Tammy Baldwin of that state let her concerns be known:
“I continue to urge Kohl’s to reject any offer that dramatically increases debt, sells off assets, increases shareholder payouts at the expense of reinvestment, or puts Wisconsin workers and communities at risk by increasing the chance of a bankruptcy—and I fear that this transaction could do all of those things.”
Let’s hope this deal goes nowhere. We cannot afford to lose another retailer.