Activist investor group Macellum Advisors GP LLC has named the slate of 10 board members that it will nominate at Kohl’s Corp.’s next investor day, scheduled for March 7.
Macellum holds nearly 5 percent of the outstanding common shares of Kohl’s.
The Nominees are:
- George Brokaw: Currently a director at DISH Network Corp., CTO Realty Growth, Inc. and Alico, Inc. Former Managing Director (Mergers & Acquisitions) at Lazard Frères & Co. LLC, where he advised companies on successful transactions.
- Jonathan Duskin: CEO, Macellum Capital Management, an investment management firm.
- Francis Ken Duane: Former Executive Vice Chairman, PVH Corp.
- Pamela Edwards: CFO and Executive Vice President, Citi Trends, Inc. Currently serves on the Board of Directors of Neiman Marcus Group.
- Stacy Hawkins: Vice Dean, Rutgers Law School, the largest public law school in the Northeast. Hawkins has served as a Professor of Law at Rutgers since 2018.
- Jeffrey Kantor: Former senior executive at Macy’s, Inc., including as CMO and Chief Stores Officer. Kantor is currently the President of JAK Consulting.
- Perry Mandarino: Co-head of Investment Banking, Head of Restructuring and Senior Managing Director of B. Riley Securities, Inc.
- Cynthia Murray: Former President, Chico’s Brand, FAS, Inc.
- Kenneth Seipel: Former CEO, Gabriel Brothers, Inc. (n/k/a Gabe’s)
- Craig Young: Founder and Managing Principal, Tidewater Capital, LLC.
Macellum also issued an open letter to shareholders coinciding with the nominations as follows:
In the wake of the troubling press release issued by Kohl’s last Friday, we are convinced – now more than ever – that a majority of the Company’s Board needs to be refreshed. The Board’s decision to hastily reject at least two recent expressions of interest to acquire the Company, both of which included sizable premiums, suggests it is no longer operating with impartiality and objectivity. The fact that the Board simultaneously adopted what appears to be an onerous, two-tiered poison pill indicates to us it is also no longer prioritizing shareholders’ interests. In our view, any directors that support such patently anti-shareholder maneuvers cannot be trusted to credibly evaluate potentially value-maximizing alternatives versus management’s perpetually ineffective plans.
As noted last week, we doubt that prospective acquirers were given adequate consideration or enough access to management, data rooms and information required to inform upward adjustments to bids. After all, the Company only confirmed receipt of the expressions of interest late last month. We also doubt that the Board has been directing its bankers to aggressively canvass the market and initiate substantive conversations with additional suitors. To the contrary, it seems to us the Board is doing everything in its power to chill a normal-course sale process and quell interest from other bidders during what we view as a unique window of opportunity.
With reports now swirling about the Company’s jet recently flying to Seattle, Washington, where Amazon is headquartered, we hope the incumbents are not losing sight of their fiduciary duties. We need to question whether the Board is fully cognizant of its obligations given it has yet to announce the Company will run an open, fair and fulsome process to evaluate all potential offers that could maximize value for shareholders. We believe anything short of that, including the prospective pursuit of a sweetheart deal that unjustifiably favors existing executives and directors, simply validates our view that the Company’s current leadership is putting its own interests before shareholders’ interests.
We feel compelled to share our blunt concerns because the Board’s approach to honoring its fiduciary duties leaves a lot to be desired. Notably, the poison pill adopted by the Board seems like it was structured to chill a sale process. The pill prevents a potential acquirer from bringing an offer directly to shareholders without risking substantial dilution. In fact, simply announcing an intent to commence a tender offer (as opposed to consummating one) triggers the pill. While the Board may claim it has built in a “qualified offer” exception, the numerous requirements to be deemed a “qualified offer” all but ensure that no unsolicited offer will ever be made. The requirements include that an offer must be fully financed with committed capital, not subject to any due diligence and not arbitrarily deemed “inadequate” by the Company’s retained investment bank. To add insult to injury, the Board has also not committed to submitting the pill for shareholder approval, despite having an opportunity to do so at the upcoming Annual Meeting.
On the heels of its brazen actions and following another year of underperformance, the Board is still telling shareholders to patiently wait until next month’s analyst day to learn about what is likely to be the latest in a long line of unsuccessful plans prepared by management and overseen by the Board. We find it incredibly arrogant for the Board to tell shareholders to sit idly by as long-tenured officers and directors, who have presided over years of underperformance, waste time and resources coming up with another strategy to try to justify their control. It is important to remember that until we issued our press release on January 18, 2022 and Acacia Research Corporation submitted a proposal to acquire Kohl’s days later, the Company had underperformed both the S&P 500 and SPDR S&P Retail ETF over the one-year, three-year, five-year and ten-year periods.
We are equally disturbed to see lame duck Chairman Frank Sica, who is not standing for reelection this year as a result of our 2021 settlement with Kohl’s, continue to speak on behalf of the Board. It is alarming that the Company has designated an outgoing Chairman with a 34-year tenure as the voice of the future. If anything, we view Mr. Sica as a symbol of the entrenchment and obstructionism that must be removed from the Board.
Given the growing list of issues and red flags in the boardroom, we believe substantial and urgent change is needed. Kohl’s is at a pivotal inflection point now that it has a window to source and consider potentially value-maximizing acquisition proposals – a window that will not be open indefinitely as the market environment and macro circumstances evolve. That is why we are nominating a slate of ten highly qualified and independent director candidates for election at this year’s Annual Meeting. Our slate possesses the right mix of corporate governance acumen, consumer and retail expertise, mergers and acquisitions experience, and independent ownership perspectives.
If elected, our nominees will bring fresh viewpoints and open minds to the Board. They will also bring a firm commitment to assessing all paths to maximizing value for shareholders. This means evaluating sale opportunities relative to a new strategic, operational and financial plan for pursuing market share growth and enhanced earnings. After more than two decades of stagnation at Kohl’s, it is long past time for a reconstituted Board to have an opportunity to pursue superior value.
Naturally, we anticipate the current Board and management will defensively adopt aspects of our platform at next month’s analyst day. We expect a long, platitude-filled presentation that is short on detailed specifics, but full of promises regarding top-line growth, margin expansion, real estate sales, balance sheet optimization and greater share repurchases. We contend, however, that relying on the Company’s present Board and executive team to finally deliver on promises would be akin to doubling down after a string of already bad bets.
Keep in mind that Kohl’s has not generated same-store sales growth for a decade. After failing to grow sales versus 2019, when trillions of government stimulus had been pumped into the economy and multiple competitors shut down, we certainly do not trust current leadership to deliver on any long-term targets set next month. We are equally skeptical of any attempts by leadership to rationalize the balance sheet and monetize real estate. Do not forget that the Board, which now appears to be botching a sale process, summarily rejected our calls for these logical steps last year.
In summary, the time for substantial boardroom change at Kohl’s has come. We fear the opportunities in front of the company right now may not exist a year from now.
Photo courtesy Kohl’s