UPDATE 2-Kohl's settles with activist group, adds three new directors

(Adds details on settlement, background on proxy contest)

April 14 (Reuters) - Department store chain Kohl’s Corp said on Wednesday it has reached a deal with a group of activist investors to avoid a proxy fight, agreeing to add two of the group’s nominees to its board as independent directors.

The company will also add a third independent director to the board at the same time and said that it expanded its share buyback plan to $2 billion.

The activist group, which controls a combined 9.3% of Kohl’s, includes Macellum Advisors GP LLC, Ancora Holdings Inc, Legion Partners Asset Management and 4010 Capital LLC. Initially the group, which previously pushed for change at retailer Bed Bath & Beyond, tried to take control of Kohl’s 12-member board by nominating nine directors before cutting that back to five candidates. It was one of the year’s biggest activist campaigns.

Kohl’s is valued at $9.6 billion and its shares climbed roughly 2% before giving back gains to trade roughly flat at $60.77.

The activists pressed Kohl’s to add board members with retail experience and move more forcefully. The company said its new strategy, unveiled in late 2020, was already addressing ways to boost sales and profits.

Margaret Jenkins, former chief marketing officer at restaurant group Denny’s Corp, and Thomas Kingsbury, former chief executive of Burlington Stores, were nominated by the activists and will now sit on the board. Former Lululemon Athletica CEO Christine Day, who has won praise from the activists, will also join.

The board now has five members with apparel experience.

Kohl’s CEO, Michelle Gass, who has held the top job for three years, said in a statement that she is looking forward to working with the new members to “further advance our transformative strategy and deliver results for shareholders.”

Last month she said that Kohl’s would again start paying a dividend and buy back stock after having suspended the programs during the pandemic to preserve cash.

Reporting by Uday Sampath in Bengaluru and Svea Herbst-Bayliss in Boston , Editing by Kirsten Donovannd Steve Orlofsky