NEW YORK/SAN FRANCISCO Hedge fund manager William Ackman introduced shareholders on Monday to his five nominees for the Target Corp (TGT.N) board, promising their expertise could make the retailer a better company.
"There is a lot to like, but that doesn't mean it can't be optimized," Ackman said at a town hall-style meeting in mid-town Manhattan.
While Target is well known for selling designer items, it is certainly not Gucci and the retailer, which sells the fashionable merchandise at discount prices, should be able to perform well even in difficult economic conditions, Ackman said.
For nearly two hours, the prominent investor, whose New York-based Pershing Square Capital Management owns a 7.8 percent stake in Target, downplayed fears he is only seeking a quick profit by launching this proxy contest and, instead, he played up the long resumes of his slate members.
"It's not about Bill Ackman. It's about how our directors compare with the existing nominees," Ackman said.
Target is Pershing Square's biggest single investment and Ackman lost a lot of money last year thanks to the retailer's poor performance.
Target's business faltered as shoppers, pressured by the recession, pulled back on buying trendy clothes and handbags and stuck to buying just the basics, such as food or medicine -- a trend that favored rival Wal-Mart Stores Inc (WMT.N). It is now trying to add more food to its merchandise assortment to lure shoppers into its stores more frequently.
But this year, Ackman is doing better, especially after the stock price jumped 45 percent since he announced his plan to replace four Target directors with five newcomers.
"We are the underdogs here," Ackman told about 150 people in the room and another 400 who registered to listen by webcast, according to Target's proxy advisers.
TOO CLOSE TO CALL
The outcome of this increasingly bitter proxy battle is too close to call since large shareholders such as State Street Global Advisors have not yet decided how to cast their votes before the May 28 annual meeting.
Ackman shared the stage with former Starbucks CEO Jim Donald; Richard Vague, the former CEO of Visa credit card issuer First USA; Richard Ashner, chairman and CEO of Winthrop Realty Trust; and Ronald Gilson, a law professor and corporate governance expert.
They sat in cherry red chairs -- mimicking Target's red bull's eye logo -- and answered questions about what they would do to help management perform better.
But Target has remained steadfast in defending its board members who are up for reelection.
"We believe that the four incumbent directors up for election are better qualified to serve the interests of shareholders than Pershing Square's nominees," a Target spokesman said.
Ackman said, however, that Pershing Square launched the proxy fight because the retailer's board had become stale after the average member served roughly a decade.
Since he first bought shares in 2007, Ackman has made several suggestions to Target. He acknowledged the company ignored his proposals to sell off all of its credit card operations, rebuffed his plan to spin off the land under its stores and rejected his suggestion he be given one board seat.
"This is not about a real estate slate," Ackman said during the presentation. "These are not five real estate executives I've sold on a plan that I'm trying to push forward."
But Target disagreed.
"We believe that the real reason that Pershing Square launched this proxy fight is because Target did not agree with Pershing Square's risky real estate agenda," a Target spokesman said.
Ackman also noted that most board members at Target did not own much of the company. He already owns a lot because he is Pershing Square's biggest shareholder. The four other Pershing Square nominees also pledged to own Target shares if elected.
Amid the many questions from the audience, Ackman tried hard to allay any fears he would cash out fast, especially now that his stock options are $8 in the money. By running for the board, he is limiting his firm's trading flexibility, Ackman said, adding that this should signal his long-term commitment.
Target shares ended down $1.06 at $42.73.
(Reporting by Svea Herbst-Bayliss in New York and Nicole Maestri in San Francisco; Editing by Steve Orlofsky and Andre Grenon)