Back in 2004, Target's sold the Mervyn's department-store chain to a group of PE investors led by Cerberus. (Faille's first law of finance: Cerberus has one of its many canine heads in everything!)
Mervyn's declared bankruptcy in 2008. (Didn't everybody?) But in Mervyn's case, ticked-off unpaid creditors decided it was all Target's fault. Target had structured the sale so as to strip to valuable real-estate holdings from the transaction, so that Mervyn's thereafter was required to make lease payments on land it had previously owned. Inflated lease payments, say the ticked-off creditors.
The estate trustee has apparently brought an adversary action against Target through the bankruptcy court. I say "apparently" because I haven't done a serious search via PACER for the actual papers yet, so I'm relying on news accounts. Said accounts tell me that Judge Kevin Gross of the U.S. Bankruptcy Court in Wilmington, Del., said the complex series of transactions should be viewed as a single deal, one that had "devastating" consequences on Mervyn's creditors, and he denied the motion to dismiss.
Last year, William Ackman tried to use a proxy fight to persuade Target to turn the land under its stores into a real-estate investment trust. His slate of nominees for the board was defeated, though. I wonder if Ackman has a cheering interest in this lawsuit one way or the other?
Showing posts with label Target. Show all posts
Showing posts with label Target. Show all posts
Tuesday, March 30, 2010
Wednesday, September 16, 2009
Target Declassifies Board
Target Corp said last week that at next year's annual meeting it will ask its shareholders to approve a measure declassifying the board of directors, i.e. henceforth requiring that every member of the board seek re-election each year.
The rules change will require approval of those who hold 75% of the shares. Nonetheless, approval of such a request will likely be granted. After all, this is a classic bone of contention between activists and incumbent, with the incumbents stereotypically seeking a staggered board, for the sake of self-preservation but in the name of continuity.
If the board itself is giving up the continuity flim-flam, no 26% of shareholders will insist upon it on their behalf.
Earlier this year, Pershing Square Capital made an issue of the staggered board in its proxy contest against Target.
I see a Reuters story on the subject quotes William Ackman, founder of Pershing Square, thus: "We applaud Target's decision to declassify the board and we believe it will contribute to stronger corporate governance in the future."
Target's incumbents won re-election in late May, as my readers may remember.
The rules change will require approval of those who hold 75% of the shares. Nonetheless, approval of such a request will likely be granted. After all, this is a classic bone of contention between activists and incumbent, with the incumbents stereotypically seeking a staggered board, for the sake of self-preservation but in the name of continuity.
If the board itself is giving up the continuity flim-flam, no 26% of shareholders will insist upon it on their behalf.
Earlier this year, Pershing Square Capital made an issue of the staggered board in its proxy contest against Target.
I see a Reuters story on the subject quotes William Ackman, founder of Pershing Square, thus: "We applaud Target's decision to declassify the board and we believe it will contribute to stronger corporate governance in the future."
Target's incumbents won re-election in late May, as my readers may remember.
Monday, June 1, 2009
Target meeting
Target's annual shareholder meeting took place in one of the chain's retail outlets, in Waukesha, Wisconsin.
Target claims that its incumbent directors have been re-elected by a comfortable margin. The four incumbents whose positions were contested are: Mary N. Dillon, Richard M. Kovacevich, George W. Tamke, and Solomon D. Trujillo.
In a statement, Target's chairman, Gregg (Three-Gs) Steinhafel said: “Today’s outcome demonstrates the confidence Target shareholders have in our Board’s qualifications, diversity and experience to provide effective and independent oversight and direction to the company, contributing to the creation of one of the most recognized brands in the United States. We remain dedicated to serving the interests of all shareholders by sustaining Target’s competitive advantage, driving continued profitable growth and generating substantial shareholder value over time.”
As to the meeting itself, Joe Nocera provides an entertaining account in Friday's New York Times. Ackman spoke on his own behalf at the meeting, and Nocera reports that Ackman seems to have known he was going to lose. It was a concession speech, aimed at persuading himself and whoever might be open to persuasion that he had been fighting the good fight.
"This is a great day for Target and for shareholders generally,” he said because the fight had been waged. He and his allies had done it because “we never want Target to be referred to as a ‘once-great company.’ ” Yet to show there is no animosity, he referred to the directors he had been seeking to replace as "stellar."
Whatever disappointment he may feel has failed to slow him down. He has a new cause, the bankrupt mall operator General Growth Properties. Of that, more another day.
Target claims that its incumbent directors have been re-elected by a comfortable margin. The four incumbents whose positions were contested are: Mary N. Dillon, Richard M. Kovacevich, George W. Tamke, and Solomon D. Trujillo.
In a statement, Target's chairman, Gregg (Three-Gs) Steinhafel said: “Today’s outcome demonstrates the confidence Target shareholders have in our Board’s qualifications, diversity and experience to provide effective and independent oversight and direction to the company, contributing to the creation of one of the most recognized brands in the United States. We remain dedicated to serving the interests of all shareholders by sustaining Target’s competitive advantage, driving continued profitable growth and generating substantial shareholder value over time.”
As to the meeting itself, Joe Nocera provides an entertaining account in Friday's New York Times. Ackman spoke on his own behalf at the meeting, and Nocera reports that Ackman seems to have known he was going to lose. It was a concession speech, aimed at persuading himself and whoever might be open to persuasion that he had been fighting the good fight.
"This is a great day for Target and for shareholders generally,” he said because the fight had been waged. He and his allies had done it because “we never want Target to be referred to as a ‘once-great company.’ ” Yet to show there is no animosity, he referred to the directors he had been seeking to replace as "stellar."
Whatever disappointment he may feel has failed to slow him down. He has a new cause, the bankrupt mall operator General Growth Properties. Of that, more another day.
Wednesday, May 27, 2009
Three meetings
Monday, May 11, 2009
Ackman and Target
William Ackman, the principal of Pershing Square, is hosting what he calls a "town meeting" today, to introduce his nominees for the board of big-box retailer Target.
Isn't that a wonderful name for such an anouncement? Reminds me of a Norman Rockwell painting. In fact, I think I'll post a photo of the relevant painting here. I gather that is supposed to be some ordinary townfolk telling his neighbors what he thinks about putting a stoplight in at State & Main.
Anyway, Ackman's nominees are as follows: himself, Michael Ashner, James Donald, Ronald Gilson, and Richard Vague. If they are successful, they will replace the following incumbents: Mary Dillon, Richard N. Kovacecich, George W. Tamke, and Solomon D. Trujillo.
Why is a slate with five names contesting a slate with four names? Apparently there is a dispute over the size of the board. Ackman believes the board ought to have 13 seats rather than 12, and that 5 of those 13 ought to be up for decision at the forthcoming annial meeting. The company holds ithas a 12 member classified board, with just the four seats at issue this year.
Target Corporation's retail segment includes general merchandise and food discount stores and Target.com, a fully integrated on-line business. In addition, the company operates a credit card segment that offers both store-brand credit cards and VISAs. The company, which operates 1,699 stores in 49 states (which state is excluded? -- I can't tell you) has sufered a severe stock price decline of late, which has ticked off Mr. Ackman, who seems to have bought in at the peak.
The Financial Times quotes Ackman thus: "This is not a poorly managed company. this is really just about improving the board."
It seems sensible to presume that dysfunctions at the board will also show up in the management. If they don't, how dysfunctional can they be? This one confuses me a bit.
I appreciate the excuse to steal the Rockwell image, though.
Wednesday, April 22, 2009
Pershing Square and Target
On April 6, Pershing Square Capital Management filed a preliminary proxy statement with the SEC regarding the upcoming annual meeting of Target Corp. (NYSE: TGT).
Its contentions are as follows:
"Despite the fact that Target’s two principal business lines are retail and credit cards, Target currently has no independent directors with senior, executive-level experience in these two businesses. Similarly, despite the fact that Target is one of the largest owners of retail real estate in the country, there are no independent directors on the company’s board with substantial real estate expertise. The board also has no significant shareholder representation, with the current directors owning less than 0.3% of the company’s outstanding common stock. As such, we believe that the current board is suboptimal from a shareholder and corporate governance perspective."
Pershing Square (i.e. William Ackman's) own nominees are: Jim Donald; Richard Vague; Michael Ashner; Ronald Gilson, and Ackman himself.
Target's board has 13 seats. One of them is now vacant. The incumbent board proposes to reduce the size of the board to 12 -- thus eliminating, rather than filling, the vacant seat.
If Target gets its wish in that respect, only four seats rather than five will be up for grabs at the next annual meeting. Ackman, writing to shareholders, has said: "We cannot conceive of a good reason to reduce the size of the board, for it will curtail the ability of shareholders to add strong board candidates of their choosing to the current board. As such, we urge you to vote against Target’s board reduction proposal."
One of the Pershing nominees, Ronald Gilson, has impressive academic credentials. He is a professor in the law schools of both Stanford and Columbia. [Which leads me to suspect he spends an awful lot of time flying over Kansas.] He's also the author of major casebooks covering corporate finance and corporate acquisitions.
One survey of citations in law journals puts Gilson at number 31st on the list of mostr frequently cited authors. (He's been cited 3,062 times.)
In case you're curious -- and why shouldn't you be? -- the single most frequently cited author in law jourals is Richard Posner. That fails to surprise me.
Its contentions are as follows:
"Despite the fact that Target’s two principal business lines are retail and credit cards, Target currently has no independent directors with senior, executive-level experience in these two businesses. Similarly, despite the fact that Target is one of the largest owners of retail real estate in the country, there are no independent directors on the company’s board with substantial real estate expertise. The board also has no significant shareholder representation, with the current directors owning less than 0.3% of the company’s outstanding common stock. As such, we believe that the current board is suboptimal from a shareholder and corporate governance perspective."
Pershing Square (i.e. William Ackman's) own nominees are: Jim Donald; Richard Vague; Michael Ashner; Ronald Gilson, and Ackman himself.
Target's board has 13 seats. One of them is now vacant. The incumbent board proposes to reduce the size of the board to 12 -- thus eliminating, rather than filling, the vacant seat.
If Target gets its wish in that respect, only four seats rather than five will be up for grabs at the next annual meeting. Ackman, writing to shareholders, has said: "We cannot conceive of a good reason to reduce the size of the board, for it will curtail the ability of shareholders to add strong board candidates of their choosing to the current board. As such, we urge you to vote against Target’s board reduction proposal."
One of the Pershing nominees, Ronald Gilson, has impressive academic credentials. He is a professor in the law schools of both Stanford and Columbia. [Which leads me to suspect he spends an awful lot of time flying over Kansas.] He's also the author of major casebooks covering corporate finance and corporate acquisitions.
One survey of citations in law journals puts Gilson at number 31st on the list of mostr frequently cited authors. (He's been cited 3,062 times.)
In case you're curious -- and why shouldn't you be? -- the single most frequently cited author in law jourals is Richard Posner. That fails to surprise me.
Monday, February 9, 2009
PS IV not the "roach motel" after all.
Readers in my age cohort may remember the old commercial for a Black Flag insect trap. "Roaches check in, but they don't check out."
Some hedge funds have been like that of late, dropping redemption "gates," or announcing the suspension of payments. "We'll take your money, but we'll be damned if we'll give it back!"
The Wall Street Journal is reporting this morning, page C1, that William Ackman, principal of the Pershing Square hedge fund group, will soon inform his investors that he'll allow them to withdraw from one of those funds, PS IV, afer all, despite talk last week that he was going to limit such redemptions.
Pershing Square IV was set up to benefit from an expected rise on the price of the stock of Target, the big-box retail chain.
The story quotes Ackman himself, "reached at his office Sunday night," saying that PS IV is down 90% and that is nothing to be proud of. But the story doesn't quote Ackman confirming the gist of what the reporters are telling us, which is that Ackman will be putting $25 million of his own cash into the fund in order to allow it to settle with the impatient, and apparently to reward the patient as well. The specifics are attributed to that old reporter's friend, "a person familiar with the matter."
During the past 13 months, Target's shares have declined in value by 38%. Pershing Square IV has been investing through stock options, not through the shares themselves, and this has had an amplifying effect on the loss.
My hunch, reading the story (and this is ONLY a hunch, a guess, a speculation, call it what-you-will) is that Ackman himself is the "person familiar with the matter." The story reads like a one-interview job to me. At parts of the interview, Ackman probably just said, "now this next bit you can't attribute to me by name" -- while at other parts he said, "now THIS bit is what you should quote me on."
The final graf of the story notes that Ackman's non-Target funds lost betwen 11% and 13% in 2008. Give how disastrous a year it was, that actually sounds like a respectable performance.
Some hedge funds have been like that of late, dropping redemption "gates," or announcing the suspension of payments. "We'll take your money, but we'll be damned if we'll give it back!"
The Wall Street Journal is reporting this morning, page C1, that William Ackman, principal of the Pershing Square hedge fund group, will soon inform his investors that he'll allow them to withdraw from one of those funds, PS IV, afer all, despite talk last week that he was going to limit such redemptions.
Pershing Square IV was set up to benefit from an expected rise on the price of the stock of Target, the big-box retail chain.
The story quotes Ackman himself, "reached at his office Sunday night," saying that PS IV is down 90% and that is nothing to be proud of. But the story doesn't quote Ackman confirming the gist of what the reporters are telling us, which is that Ackman will be putting $25 million of his own cash into the fund in order to allow it to settle with the impatient, and apparently to reward the patient as well. The specifics are attributed to that old reporter's friend, "a person familiar with the matter."
During the past 13 months, Target's shares have declined in value by 38%. Pershing Square IV has been investing through stock options, not through the shares themselves, and this has had an amplifying effect on the loss.
My hunch, reading the story (and this is ONLY a hunch, a guess, a speculation, call it what-you-will) is that Ackman himself is the "person familiar with the matter." The story reads like a one-interview job to me. At parts of the interview, Ackman probably just said, "now this next bit you can't attribute to me by name" -- while at other parts he said, "now THIS bit is what you should quote me on."
The final graf of the story notes that Ackman's non-Target funds lost betwen 11% and 13% in 2008. Give how disastrous a year it was, that actually sounds like a respectable performance.
Tuesday, November 25, 2008
Merry Christmas, Target
Bill Ackman of the hedge fund Pershing Square Cap Management, said yesterday that over the next five weeks at least Pershing won't press for talks with giant retailer Target, regarding Ackman's REIT plan.
Ackman had proposed -- and Target management has so far rejected -- a plan in which Target spins off a real estate investment trust consisting of the land underneath its stores, which it will thereafter lease from its spun-off entity.
Target claims that "the potential value created, if any, is highly speculative and insufficient to merit pursuit of a transaction given the costs, strategic and operating risks, and loss of financial flexibility."
Ackman? "We intend to pursue the matter in the new year, after the holiday season.”
My guess is that if holiday shoppers are good to Target's bottom line, the issue will go away for longer than that. This coming month is off course generally the make-or-break time for US based retailers.
Ackman had proposed -- and Target management has so far rejected -- a plan in which Target spins off a real estate investment trust consisting of the land underneath its stores, which it will thereafter lease from its spun-off entity.
Target claims that "the potential value created, if any, is highly speculative and insufficient to merit pursuit of a transaction given the costs, strategic and operating risks, and loss of financial flexibility."
Ackman? "We intend to pursue the matter in the new year, after the holiday season.”
My guess is that if holiday shoppers are good to Target's bottom line, the issue will go away for longer than that. This coming month is off course generally the make-or-break time for US based retailers.
Sunday, November 2, 2008
Target and the proposed REIT
Target's shares (NYSE: TGT) fell 6% on Thursday, AFTER bill Ackman announced his plan to enhance the value of Target's equity through a REIT spinoff.
It seemed safe to conclude the market doesn't like his plan. But then, the stock gained most of that value back on Friday. So one might have to re-think this.
I'll attaching a stock chart for last week. Target's price moves are the blue line, compared here to those of the DJIA, in yellow.
Target seems to have risen Tuesday and Wednesday. The DJIA too was rising Tuesday, but was flat on Wednesday. We can infer, I think, that traders were "buying on the rumor" as the old adage has it. They were buying on the expectation that Ackman would present a plan, even without knowing what the plan was.
What's the other half of that aage? "Buy on the rumor, sell on the fact." My own best guess is that when Ackman publicly announced his plan, whatever it was, there was bound to be some decline.
then on Friday, with the twin requirements of that adage satisfied, did the market finally express its considered opinion of the plan? If so, the plan is good, but not a Wowser! kind of good. The price rose Friday, but so did the DJIA as a whole, and the Target rise was only slightly greater than the Dow's.
I'm in a lazy Sunday kind of mood so I've let the market do my thinking for me. Here's a link to those ho want to read some less lazy blogging on this issue.
Wednesday, October 29, 2008
Update on the Pershing Square story
Yes, as he promised, Pershing Square's principal Bill Ackman did explain his plan to improve the value of the equity of Target Corp. today.
He said that the company should spin off a separate entity that will own the land on which its stores are built, then lease the land from its corporate offspring for a period of 75 years.
Target responded non-committally. It is reviewing the plan, but it has "serious concerns on a number of important issues."
It sounds like sleight-of-hand to me, but I'll give myself three days to mull it over. Catch you folks here Sunday.
He said that the company should spin off a separate entity that will own the land on which its stores are built, then lease the land from its corporate offspring for a period of 75 years.
Target responded non-committally. It is reviewing the plan, but it has "serious concerns on a number of important issues."
It sounds like sleight-of-hand to me, but I'll give myself three days to mull it over. Catch you folks here Sunday.
Three brief items
1. More on Porsche, VW, etc.
A report in today's Wall Street Journal says that several hedge funds have taken a beating as a result of their speculation in VW shares, and the spike in VW's share price I discussed in yesterday's entry.
"Those affected by the moves include Greenlight Capital, SAC Capital, Glenview Capital, Marshall Wace, Tiger Asia, Perry Capital, and Highside Capital," the p. C1 story said.
There have been rumors of effects going beyond that list, and beyond the hedge fund world.
2. Ackman has a plan for Target
Pershing Square Capital Management, which owns nearly 10% of the giant retailer Target, said it has a plan for a transaction that will boost Target's value. It will present its plan today, Wednesday.
Bill Ackman is the principal of Pershing Square, a hedge fund that has been involved in some memorable corporate in-fighting over the years. To his credit, Ackman was arguing in a very public way, before it became a commonsensical observation, that credit ratings agencies and banks were co-operating to prop up bond insurers such as MBIA so that the banks wouldn't have to write down their exposure to such insurers.
Anyway, Pershing's latest statement on Target is as follows: "Pershing Square believes that the insights gained by sharing the potential transaction in a public forum will benefit Target and all of its stakeholders."
One clue to what he has in mind: Mr. Ackman recently expressed interest in a potential derivatives transaction that he said would let Target effectively retire more of its own shares. That provides a nice segway to my final item of the morning.
3. Canada wants to restrict bank share buybacks
The most important fnancial regulator in Canada at the federal level, the Superintendent of Financial Institutions, put out an advisory note Monday that banks shouldn't be buying back their own shares. That runs counter to the goal of strengthening their balance sheets.
Canada's banks are in general in better shape than those in the US or in Europe, where as one would expect the temptation to buyback/retire shares just isn't a big problem right now. Canada's financial institutions generally have a strong retailing base, and their mortgage-lending practices have remained conservative. So I'm a bit baffled by the SFI's concern.
Apparently, though, he thinks their practices may not be quite conservative enough. The SFI's note said: "The current environment calls for increased conservatism in capital management."
A report in today's Wall Street Journal says that several hedge funds have taken a beating as a result of their speculation in VW shares, and the spike in VW's share price I discussed in yesterday's entry.
"Those affected by the moves include Greenlight Capital, SAC Capital, Glenview Capital, Marshall Wace, Tiger Asia, Perry Capital, and Highside Capital," the p. C1 story said.
There have been rumors of effects going beyond that list, and beyond the hedge fund world.
2. Ackman has a plan for Target
Pershing Square Capital Management, which owns nearly 10% of the giant retailer Target, said it has a plan for a transaction that will boost Target's value. It will present its plan today, Wednesday.
Bill Ackman is the principal of Pershing Square, a hedge fund that has been involved in some memorable corporate in-fighting over the years. To his credit, Ackman was arguing in a very public way, before it became a commonsensical observation, that credit ratings agencies and banks were co-operating to prop up bond insurers such as MBIA so that the banks wouldn't have to write down their exposure to such insurers.
Anyway, Pershing's latest statement on Target is as follows: "Pershing Square believes that the insights gained by sharing the potential transaction in a public forum will benefit Target and all of its stakeholders."
One clue to what he has in mind: Mr. Ackman recently expressed interest in a potential derivatives transaction that he said would let Target effectively retire more of its own shares. That provides a nice segway to my final item of the morning.
3. Canada wants to restrict bank share buybacks
The most important fnancial regulator in Canada at the federal level, the Superintendent of Financial Institutions, put out an advisory note Monday that banks shouldn't be buying back their own shares. That runs counter to the goal of strengthening their balance sheets.
Canada's banks are in general in better shape than those in the US or in Europe, where as one would expect the temptation to buyback/retire shares just isn't a big problem right now. Canada's financial institutions generally have a strong retailing base, and their mortgage-lending practices have remained conservative. So I'm a bit baffled by the SFI's concern.
Apparently, though, he thinks their practices may not be quite conservative enough. The SFI's note said: "The current environment calls for increased conservatism in capital management."
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