Target Won't Pursue Pershing Square Real Estate Plans
Last month, the hedge fund led by William Ackman set forth a plan for Target to spin off the land it owns into a separate, publicly traded real-estate investment trust in order to unlock its value. Earlier this week he revised the plan to satisfy Target's various misgivings. Unlike retailers that lease most or all of their outlets, Target owns 85% of the real estate for its stores, giving it control over store designs and remodeling.
On Friday, the box-box retailer also expressed concern about the costs, strategic and operating risks and loss of financial flexibility in executing such a deal amid the current economic environment. In addition, Target again noted the proposed structure could have had an adverse impact on its debt ratings.
"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," Chief Executive Gregg Steinhafel said.
Pershing, which is known as an activist investing firm, began investing in Target in April 2007 and has built its stake to almost 10% of outstanding shares. Activist hedge funds have clashed with many companies in recent years, but Pershing had suggested that it has developed a productive relationship with Target management.
Pershing and the retailer already have reached a compromise on an earlier transaction, when Target sold half of its credit-card receivables this year. In November 2007, the company also announced a $10 billion share-buyback program.
Target shares have lost almost half their value in the past year as the company has been hurt by consumers cutting back on discretionary purchases, as well as by the perception that the retailer's products cost more than those at larger rival Wal-Mart Stores Inc. (WMT).
Target has 1,684 stores in the U.S.
Shares fell 2% to $27.50 in after-hours trading.
-By Lauren Pollock, Dow Jones Newswires; 201-938-5964; lauren.pollock@dowjones.com
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(END) Dow Jones Newswires
November 21, 2008 17:16 ET (22:16 GMT)
Publié le 21 novembre 2008 Copyright © 2008 Dowjones
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