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Target proxy battle heats up as annual meeting approaches

BY DSN STAFF

NEW YORK It isn’t often that one of America’s premier retail companies finds itself the subject of a determined battle for management control by a disgruntled shareholder. That’s especially true for a retail giant with an enviable track record, a highly regarded management team and a resoundingly successful niche strategy.

 

Nevertheless, that’s the scenario facing Target’s top managers when they convene the company’s annual meeting of shareholders May 28. The event, to be staged at a Target store in Waukesha, Wis., promises a showdown between the current directors of the 1,698-store upscale discount chain and William “Bill” Ackman, a venture capitalist who is founder and CEO of investment and hedge fund firm Pershing Square.

 

 

For president and CEO Gregg Steinhafel and other senior brass, a proxy fight with an activist and very vocal major shareholder has to be an uncomfortable and unfamiliar scenario. Target’s managers like to fly under the radar, and their annual meetings are usually characterized as brief, sparsely attended, low-key events with little or no controversy.

 

 

This year’s meeting may hold enough drama to raise both the attendance level and the time limit. It’s unclear at this point how Ackman will proceed or state his case at the meeting, although it’s certain both sides are working to line up support from outside Target investors.

 

 

Ackman’s bid to stack the board with as many as five directors isn’t just a meaningless gesture from some small-stake gadfly investor with a few hundred shares of stock. Pershing Square is reported to hold some 10% of Target’s total common shares — a powerful club to wield in any fight for board representation.

 

 

That doesn’t mean Ackman will prevail; he most likely won’t. Outside agitators trying to shake up the boards of generally well-regarded companies to wring more value out of both the corporate assets and their own stockholdings don’t usually win such battles with entrenched management and boards, Carl Icahn notwithstanding. But Ackman’s influence and his appeal to uncommitted shareholders could conceivably win a concession or two from the existing board, or at least another hearing.

 

 

And what if Ackman does capture seats on the board, either late this month or in the future? It may mean little to the average Target customer. Ironically, it isn’t Target’s retail strategy, its niche marketing capabilities vis-a-vis Wal-Mart, or its merchandising prowess that the Pershing Square founder apparently disagrees with; indeed, Ackman in the past has strongly endorsed the company’s leadership and retail vision. What the investor says he really wants is a way to get Target to unlock what he describes as the unrealized value inherent in the company’s assets, notably in the real estate it owns underneath its stores, and the credit card business it generates.

 

Late this month, Target’s unaffiliated shareholders will get a chance to tell Steinhafel what they think of that idea.

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Target proxy battle heats up as annual meeting approaches

BY Jim Frederick

MINNEAPOLIS With Target Corp.’s annual meeting fast approaching, directors of the upscale discount store giant have launched a direct appeal to its shareholders asking for their support in a looming proxy battle for control of the company.

Target chairman, president and CEO Gregg Steinhafel released an open letter to company shareholders Thursday, reminding them of the upcoming annual event May 28 and urging them to re-elect Target’s current slate of directors. Steinhafel also asks the company’s stockholders to reject the demands made by dissident shareholder William “Bill” Ackman, a venture capitalist who is founder and CEO of investment and hedge fund firm Pershing Square.

The letter marks the latest salvo in a battle for control of the 1,698-store chain between Target’s board and Ackman, who has reportedly accumulated roughly 10% of Target’s shares and has waged a long campaign for representation on the company’s board of directors.

Ackman is attempting to win shareholder support for a major change in Target’s strategy and the makeup of its board. An activist investor known to be impatient with the company’s stock-growth performance, he gained notice earlier in the decade for his occasionally successful attempts to wield influence and build shareholder value at McDonald’s, Wendy’s and Ceridian after building shareholder stakes in those firms.

Ackman said he intends to nominate five representatives for election to the board at the May 28 meeting. That announcement, made earlier this year, came after negotiations between the two sides broke down following a nearly two-year series of discussions over the use of Target’s assets to drive up shareholder value, particularly over the company’s real estate holdings and its credit card business.

Ackman is seeking to force Target’s board to squeeze more value from its real estate holdings – since many Target stores sit on land owned by the company – through sale-leaseback arrangements. He has also reportedly argued for a spin-off of the company’s credit card business.

Both moves, Pershing Square asserts, would raise Target’s stock price, boost long-term value for shareholders and renew management’s focus on core retail activities.

In his letter Thursday, Steinhafel sharply countered those assertions and reaffirmed his support for Target’s current slate of directors, four of whom are up for re-election this month.

“Target’s nominees are part of a board and management team that have together devised the strategy that has built Target into one of the most successful retailers in the United States,” he asserted. “Target’s nominees, Mary N. Dillon, Richard M Kovacevich, George W. Tamke and Solomon D. Trujillo, are an integral part of a successful board and management team.

“We believe Pershing Square has presented no plan or strategy to justify a change,” Steinhafel added. Indeed, he told shareholders, “It appears that Pershing Square has launched its proxy contest because Target rejected [its] risky real estate proposal after careful evaluation.”

Noting that Ackman’s investment firm “presented a series of real estate proposals to Target,” Steinhafel elaborated on those proposals in his appeal to shareholders Thursday.

“Pershing Square asked Target to consider the IPO and subsequent spin-off of a separate publicly traded real estate investment trust that would own substantially all of the land currently owned by Target,” he wrote. “It was only when Target, after careful review, rejected Pershing Square’s risky real estate proposal that Pershing Square initiated its proxy contest.”

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AAFES to open convenience store on Rhode Island base

BY Michael Johnsen

DALLAS The Army and Air Force Exchange Service will begin serving state No. 50 next week with the opening of a convenience store at the Rhode Island National Guard Air Base, the military retailer announced Tuesday.

“Until the Quonset Point Shoppette’s grand opening in June, AAFES will continue serving troops in approximately 30 countries and 49 states,” stated AAFES’ chief of corporate communications Lt. Col. William Thurmond. “Identifying the one state we didn’t have a facility in made for an interesting trivia question, but we’re excited about the opportunity to support military families in the North Kingstown area as well as the troops stationed at Quonset Point.”

The convenience store at the Rhode Island National Guard Air Base, scheduled to open on May 19, will begin as a modest operation, offering a variety of snacks, cold beverages ,as well as health and beauty items.

“We have high hopes for the Rhode Island National Guard Air Base exchange,” Thurmond said. “This facility is not just for those drilling or working at the base, it’s also for the retiree, Reserve and Guard Families who live around the installation. Their support will be critical to the future success of the exchange benefit in Rhode Island.”

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