After I watched this I got the impression former Citi (C) CEO Chuck Prince ought to take the Kingdom off his vacation list..$$
Alwaleed has some very interesting things to say about Oil (USO) also
Disclosure (“none” means no position):none
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Just do not understand this one…what are they thinking???
Press Release:
Target Corporation (NYSE:TGT) disclosed today that after a comprehensive evaluation of various real estate structure ideas proposed by Pershing Square over the past six months, it has decided not to pursue them further. Following a thorough review of the transaction outlined by Pershing Square by members of Target management, Board of Directors and outside advisors, including Goldman Sachs (GS), the company has concluded 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 related to executing the proposed transaction. These concerns are heightened in the current economic environment.
Analysis of the most recent Pershing Square idea revealed that concerns previously expressed by the company remain. These include:
* The validity of assumptions supporting Pershing Square’s market valuation of Target and the separate REIT entity,
* The reduction in Target’s financial flexibility due to the conveyance of valuable assets to the REIT and the large expense obligation created by the proposed lease payments, which are subject to annual increase,
* The frictional costs and operational risks, including tax implications, of executing Pershing Square’s ideas, and
* The risk of diverting management’s focus away from core business operations over an extended time period to execute such a complex transaction, particularly in the current environment.
One additional earlier concern, relating to the adverse impact the company believed the proposed structure would have on Target’s debt ratings, borrowing costs and liquidity, has been partially addressed in the current version of Pershing Square’s proposal, though we believe meaningful risk remains.
“Target has a strong record of engagement and open dialogue with shareholders over many years and we respect the spirit with which Pershing Square’s real estate ideas were presented,” said Gregg Steinhafel, president and chief executive officer of Target Corporation. “We gave these ideas a full and complete review, including numerous meetings between Pershing Square and Target senior executives and a meeting between Bill Ackman, the Managing Member of Pershing Square, and several members of Target’s Board. Target does not share Pershing Square’s perspective that execution of this proposed transaction will generate measurable shareholder value over time and believes the risks, particularly in light of the serious challenges facing our retail and credit card segments in 2008 and 2009, are significant. Both our Board and executive team remain firmly committed to generating value for our shareholders and expect to achieve this objective over the next 3 to 5 years through our continued, thoughtful focus on our current strategy and core business operations.”
So, let’s review. Here is Ackman’s proposal:
Let’s address Targets concerns:
– Market Value: Ackman specifically gives a range of potential values in the presentation based on what current retailers / REIT’s are selling for today. To imply these are wrong is not logical. The market values them at what they value them at, it isn’t wrong.
– Flexibility: This is why Ackman recommended to a partial 20% IPO of the REIT. This would allow management gauge how it is valued by the market and still allow management the financial flexibility having an 80% owned REIT subsidiary comes with. It also, as a REIT increases the flexibility of Target to buy real estate from current landholders
– Frictional costs and operational risks: Can anyone tell me what that means? What operational risk? You are your REIT’s sole tenant. The only “risk” is if you decide not to pay yourself rent. As far as frictional costs, this is just irrelevant. If you are going to monetize a currently worthless asset (in the market’s view), then of course there will be costs involved but they will be dwarfed by the asset’s new value.
– Focus: Can’t walk and chew gum? This borders on absurd. You are creating a REIT with one tenant, yourself. Lock the lawyers in a room for a week, let them draw up the paperwork and sign it at lunch one day. Tell me how the fashion departments purchasing manager’s job will be affect by the REIT plan. Please anyone tell me what I am missing..
Here is the sentence every current shareholder ought to pay very close attention to. “Both our Board and executive team remain firmly committed to generating value for our shareholders and expect to achieve this objective over the next 3 to 5 years….”. Basically, the next 2-3 years are dead money.
Think about it. When do you expect a meaningful turnaround in the macro environment. 1 year? 2? If it takes two years, Target will not turn ahead of it. If anything, one could argue Target may take longer as any ground they made on Wal-Mart (WMT) the previous 4 years was wiped out and then some in the last one.
Target is viewed as a pricey store. True or not is irrelevant. Perception is reality. Just ask Citi’s (C) CEO Pandit. It takes a ton of advertising to change the perception of a retailer and in a recession and dreadful retail environment, the cash to do that is limited.
Ackman’s plan allows shareholder to profit in the short run from the REIT spin and then profit down the road when retail turns around. Win win.
Target management ought to know….Ackman is not going away. Why? He is right and has more invested in the company than they do. He was right with McDonalds (MCD) when it spun Chipotle (CMG) (it should be noted that the CFO of McDonald’s at the time just joined Pershing).
Mr. Ackman will take time and come out guns blazing after the new year….
Disclosure (“none” means no position):Long WMT, MCD, none
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Dow Chemical (DOW) EVP Heinz Haller purchased another 10k shares Friday.
Haller now own over 96k shares directly. This is the fifth insider purchase in the last few weeks as execs have spent pver $1.2 million buying shares on the open market.
($dow)
Disclosure (“none” means no position):Long Dow
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The term sheet is included here also…
The U.S. government is committed to supporting financial market stability, which is a prerequisite to restoring vigorous economic growth. In support of this commitment, the U.S. government on Sunday entered into an agreement with Citigroup to provide a package of guarantees, liquidity access, and capital.
As part of the agreement, Treasury and the Federal Deposit Insurance Corporation will provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup’s balance sheet. As a fee for this arrangement, Citigroup will issue preferred shares to the Treasury and FDIC. In addition and if necessary, the Federal Reserve stands ready to backstop residual risk in the asset pool through a non-recourse loan.
In addition, Treasury will invest $20 billion in Citigroup from the Troubled Asset Relief Program in exchange for preferred stock with an 8% dividend to the Treasury. Citigroup will comply with enhanced executive compensation restrictions and implement the FDIC’s mortgage modification program.
With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy.
We will continue to use all of our resources to preserve the strength of our banking institutions and promote the process of repair and recovery and to manage risks. The following principles guide our efforts:
* We will work to support a healthy resumption of credit flows to households and businesses.
* We will exercise prudent stewardship of taxpayer resources.
* We will carefully circumscribe the involvement of government in the financial sector.
* We will bolster the efforts of financial institutions to attract private capital.
Here is the term sheet for the Citi (C) deal..
This means that JP Morgan (JPM), Wells Fargo (WFC) and USB (USB) are essentially the only large investment grade banks left..
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Ross likes Obama’a pick for Treasury..
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Pacman, BUD, Imports, Admit
– Why? we all know how this story ends…
– Nice work George!!
– They are not selling either
– This is a good list
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Blindly printing money in order to stop deflation might just lead us into a period on “hyper-inflation”.
Part 1:The Fed’s balance sheet “look like a Central American Central Bank’s”
Part 2:The current crisis is a direct result of the near 0% interest rates of 2002-2003
Part 3:On “mark to market”. Removing it is essentially “price controls”
Disclosure (“none” means no position):
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Pat Dorsey who wrote the great book “The Little Book that Builds Wealth” and his take on Berkshire Hathaway (BRK.A) and its current sell off.
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Disclosure (“none” means no position):None
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Thank you to reader Vlado for this…….an instant classic..
Disclosure (“none” means no position):
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55.00002% of the outstanding shares are now held by Gates, Eddie Lampert and Todd Sullivan. 🙂
Microsoft Chairman Bill Gates has taken a 10% stake in car retailer AutoNation Inc., according to a regulatory filing Friday.
Gates’ investment firm, Cascade Investment LLC, owns 9.4 million shares, or 5.3 percent, and the Bill and Melinda Gates Foundation Trust holds 8.3 million shares, or 4.7 percent, according to the filing with the Securities and Exchange Commission.
In July, Gates disclosed a 5.5 percent stake in AutoNation, also through Cascade and his foundation trust, which together at the time held 9.9 million shares.
AutoNation’s largest shareholder is billionaire investor Edward S. Lampert who disclosed last week that his entities control about 45% company’s outstanding stock.
Disclosure (“none” means no position):Long AN
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Berkshire’s (BRK.A) Warren buffett sits down with Fox Biz…
Part 1:The Market & Paulson
Part 2:Economy and Jobs & Goldman Sachs (GS)
Part 3:Auto Industry: “the model must change”
Part 4:More on Paulson
Bill Ackman’s plan for Target (TGT) is getting good reviews out there..
Here is the Lazard Research Piece:
Here is Ackman’s latest proposal
Disclosure (“none” means no position):None
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The “Gloom,Boom and Doom Report” editor says we are “oversold” in almost all areas…
Part 1: Very good value in corporate bond market
Part 2:
After a very rough start, Wal-Mart (WMT) CEO Lee Scott is stepping down with his retailer again “the place to shop”…
Back in May of 2007 I said it was time for Scott to go. I said rather than concentrating on growth, he ought to cut back growth, buyback shares and invest in current locations. Less than a month later Wal-Mart announced they were cutting back expansion plans and planned a $15 billion share repurchase plan.
No, I do not think they were listening to me but it does show Scott was nimble enough to turn the tide of two decades of breakneck growth plans and change the company’s focus. For that he ought to get kudos…
It wasn’t too long ago we were hearing about how Target (TGT) was displacing Wal-Mart as the top retailer…….haven’t heard that for a while now..
Don’t think we will be either…
Disclosure (“none” means no position):Long WMT, TGT
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Recent complaints by Citi’s (C) Pandit and Bank of America’s (BAC) Lewis can only leave investors head shaking..
Today Vikrim Pandit said that “rumor mongering” was at the heart of the company’s stock slide and yesterday called in Gov’t officials to re-instate the short sale ban. It should be noted that this was tried earlier this fall, and , well, stocks fell anyway. Not sure what Pandit hopes to accomplish here. He also said the bank has plenty of liquidity and will not break itself up.
I can believe #1 but still do not understand #2 at this point. There has to be assets that can be sold to raise equity. They have $2 trillion of them. Something must be able to let go…
Now, watch Ken Lewis in Chicago Thusday..
Lewis blamed “lax regulation” for much of the problems today. Was he forced to loan money? Was he forced to pay billions for Countrywide (CFC) when he could have just stood still and watched it go into bankruptcy? Was he forced to overpay for Merrill Lynch? He bought it and paid what he did for “before someone else bought it”. Now, if we listen to what Lewis said above, then his reasoning behind buying it then was flawed. If that model can no longer survive, then had he waited, he could have bought it far cheaper and no, Ken, no one else wanted it.
Ever notice how little we hear from Kovacevich at Wells Fargo (WFC) and Dimon at JP Morgan (JPM)? It seem the only time we hear from them are when Dimon is bailing out another institution or Kovacevich is complaining about being force fed TARP funds he does not want.
Whining about short sellers has never entered into the conversation.
Lewis and Pandit are seeing their company’s in the positions they are in due to poor decisions. Lewis has no one to blame but himself with very poor acquisitions recently. Both the businesses he bought and the prices he paid should have never been attempted. Pandit can blame the mess he inherited on former CEO Chuck Prince but cannot excuse the near year of inaction he has since held rein over.
Don’t invest in companies who blame other for the stock and performance slide…
Disclosure (“none” means no position):Long WFC, none
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