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Target enters Canada via acquisition of Zellers' units

Minneapolis -- Target Corporation is for the first time expanding beyond U.S. borders with its purchase of the leasehold interests in up to 220 sites From Zellers Inc

This transaction - which calls for Target to pay $1.825 billion -- will allow the discount retailer to open its first Target stores in Canada beginning in 2013. Zeller's is a subsidiary of the Hudson's Bay Company (HBC).

Gregg Steinhafel, chairman, president and ceo, described the acquisition as "an outstanding opportunity for us to extend our Target brand, Target stores and superior shopping experience beyond the United States for the first time in our company's history. We believe our investment in these leases will strengthen the surrounding communities as well as create strategic and financial value for Target stakeholders."

Target will make two equal payments of C$912.5 million, first in May and then in September 2011. Zellers Inc. will sublease these sites from Target and continue to operate them under the Zellers banner for a period of time.

Further enhancing its Canadian presence, Target expects to open 100 to 150 Target stores throughout the North American country in 2013 and 2014. The retailer noted the financial returns on these stores are expected to be in line with returns on new Target stores in the United States, resulting in dilution to earnings prior to store openings followed by accretion to earnings in the first full year of store operations.

"These stores will provide a strong, initial foundation for a more robust Target presence in Canada over time," Target said.

Target expects that renovation of leased sites will result in an aggregate investment of more than C$1 billion.

Target also announced today that it intends to actively pursue the sale of its credit card receivables portfolio, which totaled US$6.7 billion as of Oct. 30, 2010. First Annapolis has been engaged to advise Target in this process.

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