Activist shareholder presents case in Target board fight
New York City Activist shareholder William Ackman introduced Target Corp. shareholders on Monday to his five nominees for the company’s board, promising their expertise and fresh perspective could help the retailer become more profitable.
For nearly two hours, Ackman, whose New York-based Pershing Square Capital Management owns a 7.8% stake in Target and is the company’s biggest single investor, downplayed fears he is only seeking a quick profit by launching the proxy contest. Instead, he played up the long resumes of his slate members. Ackman said Pershing Square launched the proxy fight because Target’s board had become stale after the average member served roughly a decade.
“It’s not about Bill Ackman. It’s about how our directors compare with the existing nominees,” Ackman said at a town hall-style meeting in Manhattan, Reuters reported.
Ackman’s slate includes himself, Winthrop Realty Trust chairman and CEO Michael Ashner; former Starbucks Corp. CEO Jim Donald; law professor Ronald Gilson; and former chairman and CEO of First USA, Richard Vague. Ackman said the nominees are independent and not being picked to push any specific agenda of his.
The outcome of the increasingly bitter proxy battle is too close to call since large shareholders such as State Street Global Advisors have not yet decided how to cast their votes before the May 28 annual meeting, according to Reuters.
Target has remained steadfast in defending its board members who are up for reelection.
“We believe that the four incumbent directors up for election are better qualified to serve the interests of shareholders than Pershing Square’s nominees,” a Target spokesman said.
Since he first bought shares in 2007, Ackman has made several suggestions to Target. He acknowledged the company ignored his proposals to sell off all of its credit-card operations, rebuffed his plan to spin off the land under its stores and rejected his suggestion he be given one board seat.
“This is not about a real estate slate,” Ackman said during the presentation. “These are not five real estate executives I’ve sold on a plan that I’m trying to push forward.”
Target, however, has maintained the opposite view.
“We believe that the real reason that Pershing Square launched this proxy fight is because Target did not agree with Pershing Square’s risky real estate agenda,” a Target spokesman said.
The presentation offered no specifics from the nominees on what they would do as the nominees said they didn’t have access to confidential data. But it did offer some hints. Ashner said he would explore new ways to unlock Target’s real estate value, while Vague said he would address getting the company out of underwriting its credit-card business so it can focus on marketing and branding its business.
Target’s annual meeting is set for May 28.
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Target takes a pass
Target declined a CNBC invitation to appear alongside Bill Ackman yesterday morning as he offered up reasons why investors should vote for his alternate slate of directors. However, the company couldn’t let his assertions go unchallenged, so 15 minutes before Ackman was scheduled to preside over a town hall meeting in Manhattan, a press release was put up titled, “Questions that attendees may want to ask at the Pershing Square town hall.”
The questions were of little use to anyone actually attending the meeting, but had greater value for media outlets covering the issue, as the release enabled Target to provide useful background by asking questions that were largely rhetorical in nature. That much was evident in the very first question, which asked, “Why should Target shareholders believe that this proxy fight is about anything other than Pershing Square’s REIT proposal?” Other questions sought to call attention to details that Ackman has failed to mention and sought to position him as a careless risk-taker with a less-than-stellar track record. For example, Target asserts that investors in the Pershing Square IV fund have experienced a huge loss due to a concentration of risk and asked, “Does Pershing Square still think it is appropriate for a fiduciary of Target to advocate taking leverage to risky levels?” Along similar lines, the company noted that Pershing Square proposed Target repurchase $15 billion in stock in 2007 and asked, “With the benefit of hindsight, does Pershing Square agree that its proposed course of action would have been financially irresponsible for Target?”
Other questions weren’t questions at all, but were more like editorial statements. Pershing Square has asserted that Wal-Mart has outperformed Target, when the opposite is true for the past 10-year, five-year and year-to-date periods, and Pershing Square cherry-picked time periods to show otherwise. “Isn’t it obvious that Pershing Square has done this in order to try to put Target in the worst light possible?”
Of course. Ackman has to stoke dissention among shareholders who tend to be apathetic toward the election of board members to secure votes for his alternate slate.
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