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Pershing Square Turns up Heat on Target — Again

Activist investor William Ackman's Pershing Square Capital Management is escalating its effort to seat a slate of officers on Target's board of directors, arguing Target's board lacks appropriate experience in retail, credit cards and real estate.

The firm recently sent a letter to Target's shareholders staking out its position and announced a town hall meeting on May 11 at the AXA Equitable Auditorium in New York at which the private equity firm will present its nominees. The letter invites Target shareholders to attend in person or follow the program on a webcast at www.TGTtownhall.com.

"The nominees we have proposed bring extensive expertise in food retailing, credit cards, real estate, shareholder value and corporate governance," the letter stated.

At the heart of the struggle is the Target board's rejection of a Pershing plan to spin off the retailer's real estate into a separate company. Pershing Square owns 7.8% of the company — approximately $1 billion of common stock and roughly $280 million in stock options.

"By virtue of our common stock ownership alone, Pershing Square is Target's fourth largest shareholder. When our stock options are included, we rank as Target's third largest investor," the letter stated. "With more than a $1.25 billion investment in Target, we believe that it is self-evident that Pershing Square has a greater economic motivation to create long-term shareholder value than the incumbent directors."

The letter also offers head-to-head comparisons between its prospective board members and Target's. Pershing Square's nominees include:

  • Ackman, founder of Pershing Square and a private equity investor;

  • Jim Donald, former ceo of Starbucks and Pathmark, whose background includes Wal-Mart's SuperCenter business;

  • Richard Vague, a credit card operating executive and former ceo and co-founder of First USA, the largest VISA credit card issuer before it was sold to Bank One (now JPMorgan Chase);

  • Michael Ashner, a real estate executive who manages over 20 million square feet of commercial real estate and has acquired more than $12 billion of real estate in 45 states, including apartment units, hotels and office, retail and industrial space;

  • Ron Gilson, an expert in the field of corporate governance and currently Professor of Law and Business at both Stanford Law School and Columbia University School of Law.

The four directors to whom Pershing's five nominees are compared in the letter include:

  • Mary Dillon, evp and global chief marketing officer for McDonald's;

  • Richard Kovacevich, chairman of Wells Fargo & Company;

  • Solomon Trujillo, ceo and a director of Telestra Corporation Limited, an Australian communications company;

  • George Tamke, partner at leveraged buyout firm Clayton, Dubilier & Rice.

Pershing Square has filed a proxy statement on the matter and is mailing it to Target shareholders along with a gold proxy card, which they are being encouraged to bring to Target's annual meeting on May 28.

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