So here is Target’s (TGT) response ti Bill Ackman’s proposal yesterday.
Oct. 29, 2008–Target Corporation (NYSE:TGT) confirmed today that Pershing Square has asked the company to consider the spin-off of a separate publicly-traded real estate investment trust (REIT) that would own substantially all of the land currently owned by Target. Pershing Square’s views of the consequences of executing this proposed transaction were publicly disclosed in a meeting hosted by Pershing Square earlier today. As previously indicated, Target has been evaluating similar ideas proposed by Pershing Square, with the assistance of Target’s outside advisors, including Goldman Sachs since May 2008.
While the company has not yet reached a conclusion regarding the merits of these ideas, its analysis raises serious concerns on a number of important issues, including:
— 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 adverse impact that the company believes the proposed
structure would have on Target’s debt ratings, borrowing costs
and liquidity, exacerbated by current market conditions,
— 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.
Target will continue to evaluate the most recent assumptions and ideas provided by Pershing Square in today’s public presentation and will provide updated perspective, as appropriate, in the near future.
Target remains firmly committed to creating value for its shareholders, as evidenced by its long-term financial performance, extensive record of strong corporate governance practices and a number of recent actions authorized by its Board of Directors and executed by management. For example,
— For the 10-year period through September, 2008, total return
to Target Corporation shareholders averaged 11 percent
annually, well in excess of the 3 percent average annual
return on the S&P 500 Index and the 7 percent average annual
return on the S&P Retail Index for the same period.
— In May 2008, Target announced the sale of a 47 percent
interest in its credit card receivables to JPMorgan Chase.
This agreement provided Target with sufficient liquidity to
implement its business plans, including previously announced
capital investment and share repurchase activity for 2008.
— In November 2007, Target announced that its Board of Directors
authorized a new $10 billion share repurchase program,
replacing the previous authorization. Since the inception of
this share repurchase program through September 2008, Target
has repurchased a total of 93.3 million shares of its common
stock for a total cash investment of $4,826 million ($51.70
per share).
Target Corporation’s retail segment includes large 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 branded proprietary and Visa credit card products. The company currently operates 1,684 Target stores in 48 states.
Target Corporation news releases are available at www.target.com.
CONTACT: Target Corporation
John Hulbert, 612-761-6627
or
Susan Kahn, 612-761-6735
or
Lena Michaud, 612-761-6796
FULL RELEASE
Disclosure (“none” means no position):NONE
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