Kohl’s Corp.
KSS,
+5.44%
beat back activists and is in talks to be sold for around $8 billion. But its suitor could bring a new set of challenges for the department-store chain.
Franchise Group Inc.
FRG,
+1.31%,
which owns The Vitamin Shoppe, Pet Supplies Plus and other retailers, said it has entered into a three-week exclusive negotiation period to acquire Kohl’s for $60 a share. Franchise Group said it would kick in $1 billion, but most of the deal will be financed by selling Kohl’s real estate.
There are no guarantees the two sides will reach a deal.
Franchise Group, which mainly owns franchise businesses, is smaller than Kohl’s with a market capitalization of about $1.5 billion. 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.
Franchise Group didn’t respond to requests for comment. Kohl’s declined to comment.
An expanded version of this story appears on WSJ.com.
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