Activist investor Bill Ackman presented in person his board
nominees to Target Corp. (TGT) shareholders and members of the
media Monday, in a town hall-style question-and-answer session
designed to alleviate concerns about his motives for trying to
force changes at the retailer.
After recapping his Pershing Square Capital Management's history
investing in Target, Ackman introduced and defended his four board
nominees, which he says have the "more specialized expertise" that
Target needs in retail, credit cards and real estate. Those are the
three areas which the hedge-fund manager considers most important
to Target. Ackman has also nominated himself for the board. He held
the meeting to prove his nominees were independent from him and his
firm, and to argue why they were better than Target's slate of four
incumbents.
While Ackman continued to say he respects management at the
presentation, held in midtown Manhattan, he took the company to
task for several things, like management's "stunning" pattern of
stock sales. Ackman pointed out that Target management has sold
$428.5 million worth of stock the past five years, while buying
only $3.8 million worth. Members of the board have also sold more
than they've bought in the past five years.
After briefly introducing the four nominees - former Starbucks
Corp. (SBUX) and Pathmark Stores Inc. (PTMK) Chief Executive Jim
Donald, credit-card industry veteran Richard Vague, real-estate
investor Michael Ashner and corporate-governance expert Ron Gilson
- Ackman went one-by-one pitting each nominee against a specific
Target board member up for re-election, pointing out why his
nominees were better.
"This board reminds me of a 'friend of Bob - Bob Ulrich' -
board," Ackman said, referring to Target's former CEO. Not having
real-estate, retail or credit card experts, he said, puts Target at
a disadvantage against competitors that do, like Wal-Mart Stores
Inc. (WMT).
While the meeting was designed for investors and the media to
ask questions of the nominees themselves, most questions were
directed at Ackman, who steered his answers back to the nominees so
they could answer individually. At times, Ackman appeared to be a
journalist himself, interviewing his nominees. At one point, he
joked that Donald was nominated just as much for the mistakes he
made as his successes, something he had said on CNBC earlier
Monday, with Donald by his side.
Most of the non-Ackman questions came for Donald about retail
and groceries, and Gilson about corporate governance. Gilson at one
point got a chance to defend the nominees' independence from
Ackman, responding to a question of whether he was concerned about
Pershing Square's motives as a hedge-fund manager.
"The people who are going to be in the boardroom other than Bill
aren't Pershing Square," Gilson said, adding that if the nominees
are elected, Pershing Square's stake will be irrelevant. In fact,
Ackman joked that while he wants at least the other four elected,
he understands if shareholders rejected him as a director if they
disliked "hedge funds or derivatives," though he pointed out that
current Target board members also own options.
Pershing Square started investing in Target in 2007, when the
stock traded in the $60s. Since then, he has tried to get the
company to get out of the credit-card business - Target wound up
cutting some but not all of its exposure - and to spin off the
property under its stores as a real estate investment trust,
something the company rejected.
Ackman said Monday that while Target asked Goldman Sachs to
review the Pershing Square real-estate transaction, he believes the
company didn't explore any real-estate options other than his.
Still, he said, "This is not about a real-estate slate,"
something the company has said is his key motivation for gaining
board seats.
In fact, he tried to deemphasize the importance of his
real-estate plan, saying multiple times that he wasn't as concerned
with his real-estate plan as he was some exploration of Target's
real-estate assets. He also conceded that the company's
credit-ratings are very important, something that he didn't
emphasize when he was making his credit-risky real-estate
proposal.
Other points of contention include Ackman's desire for a
universal proxy card, which would allow Target shareholders to pick
and choose from both his and Target's nominees without having to
attend the company's annual shareholder meeting. The point was
similar to one made by fellow activist investor Nelson Peltz on
CNBC's "Squawk Box," which Ackman served as guest host of Monday
morning.
"It's just like ordering from a Chinese restaurant: some from
column A, some from column B," Ackman said during the shareholder
presentation, echoing almost verbatim Peltz's point from CNBC.
Ackman also said Target didn't seriously consider Vague and
Ashner when he previously nominated them to the board, before the
proxy fight.
"The board has spent less time with Richard Vague and Michael
Ashner than you have," Ackman said to the audience.
Pershing Square owns 7.8% of Target's outstanding shares through
stock and options. Public presentations regarding companies he
invests in have become common for Ackman. The podium from which he
spoke was even adorned with Pershing Square's diamond logo.
New York-based Pershing Square, which Ackman founded in 2003,
has more than $5 billion under management in a concentrated
portfolio. The company is currently involved in the bankruptcy of
General Growth Properties, and is a large investor in Borders Group
Inc. (BGP).
Target shares recently traded up 31 cents at $43.48. Shares up
more than 25% this year.
-By Joseph Checkler, Dow Jones Newswires; 201-938-4297;
joseph.checkler@dowjones.com