The Vitamin Shoppe owner gets buyout offer topping $1B

Dive Brief:

Franchise Group, which franchises or operates The Vitamin Shoppe, Pet Supplies Plus and other businesses and was once in the running to buy Kohl’s, on Monday said it received an unsolicited non-binding proposal to be acquired.
The offer is for $30 per share in cash, according to a company press release. That values the company at $1.05 billion, per Retail Dive’s calculation.
The company didn’t immediately respond to questions about the would-be buyer, which was not disclosed. Franchise Group said its “board of directors will carefully evaluate the proposal to determine the course of action that it believes is in the best interests of the Company and all FRG stockholders.”

Dive Insight:

It’s possible that Franchise Group has found a way to take the company private, and that this offer is coming from inside the house.

The company’s management, led by CEO Brian Kahn, in January was reportedly mulling paying $30 to $35 per share themselves, The Wall Street Journal reported at the time. The company’s stock has taken a beating in the past six months, ending Friday at $22.75 per share; the price has risen since the buyout offer was revealed.

Kahn and Vintage Capital Management and its affiliates, as of the end of last year, owned 40.2% of Franchise Group’s outstanding common stock, per Franchise Group’s annual report, filed earlier this year.

The Vitamin Shoppe owner last year was poised to acquire Kohl’s for $60 per share in cash or $9 billion, contributing about $1 billion funded through an increase in its secured debt facilities. The department store rejected the deal after Franchise Group lowered its bid to $53 per share. At the time, some analysts criticized the retailer for moving too slowly, allowing its suitor to balk in an uncertain environment for retail.

A takeover of Kohl’s would have only added to Franchise Group’s debt load. In its annual report, Franchise Group listed its “substantial indebtedness” as a risk to its business and warned that rising interest rates “may adversely affect interest rates on certain of our outstanding indebtedness.” The company’s total long-term obligations, excluding current installments, as of Dec. 31 stood at $1.4 billion, per its report.