Activist investor proposes two options to lift Kohl’s stock price

Shares of Kohl’s Corporation (NYSE: KSS) are up nearly 10% on Monday after activist investor Engine Capital proposed two options that could boost the retailer’s stock price.

Engine Capital: sell or separate

The New York-based hedge fund wants Kohl’s to consider selling itself to private equity firms, some of which, it is convinced, would pay at least $75 a share for the department store retail chain.

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The other alternative, Engine Capital wrote in its letter to Kohl’s Board, is to consider separating the company’s digital business, which is estimated to drive roughly $6.2 billion in revenue and, therefore, could be valued at $12.4 billion as a standalone entity.  

The proposal stems from Kohl’s stock price that, as of Friday’s close, stood at where it was a decade ago, despite a 19% year-to-date gain this year. Engine Capital has a rather small, 1.0% stake in Kohl’s.

The news comes only weeks after Kohl’s said it was in great shape for the holiday season from a supply standpoint as it reported a blowout quarter.  

Mickey Drexler: ‘it doesn’t make sense to me’

On CNBC’s “Squawk Box”, retail mogul Mickey Drexler voiced a different opinion. Disagreeing with Engine Capital’s demand, he said:

How do you split them off? You change the name of one, have different merchant and operating teams? It doesn’t make sense to me. I couldn’t imagine splitting them off when they are so embracing each other.

Drexler has held top position at notable U.S. retailers, including GAP and J. Crew. Currently, he’s the CEO of Alex Mill. At none of the companies he has run, he added, he’d consider separating eCommerce from bricks and mortar.