An activist group, a New York-based hedge fund, Engine Capital, is pressuring Kohl’s to consider either a sale or a separation of its online business. The request follows a similar move by Saks Fifth Avenue.

Macy’s is also facing pressure from activist firm Jana Partners to separate its online operations. Macy’s has since hired consulting firm AlixPartners to review its business structure.

The New York-based hedge fund Engine Capital wants Kohl’s to explore two alternatives to boost its stock price, it said in a letter sent to Kohl’s Board that was published publicly on Monday. Engine Capital owns roughly a one percent stake in Kohl’s.

Engine Capital said in its letter that assuming Kohl’s brings in online sales revenue of about $6.2 billion, its digital business alone would be worth $12.4 billion.

Engine Capital also said it believes that private equity firms would pay at least $75 per share for the retailer, and the group of investors said that talks with potential buyers suggest they could further monetize the retailer’s real estate.

“Kohl’s has a unique retail footprint relative to many mall-based retailers as well as a growing e-commerce presence,” Engine Capital said.

The hedge fund also said that Kohl’s should consider a strategic review of the company and consider a sale to a buyer who could offer a meaningful premium, adding it believes some sponsors would pay at least $75 per share.

Engine Capital wrote, “A private equity buyer would likely take advantage of Kohl’s prodigious free cash flow and run the company with significantly more leverage than the Board is willing to, which would lower its cost of capital and therefore put a buyer in a position to pay significantly more for the Company than where it currently trades. Our interactions with these types of buyers suggest they would aim to take advantage of the Company’s real estate to lower their equity checks and further increase their internal rate of return, which again would allow them to pay more to public shareholders.”

Kohl’s has not responded to requests for comment.

Photo courtesy Kohl’s