Target proxy battle heats up as annual meeting approaches

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.”