US retailer Target finds itself target of proxy fight by activist investor

Fifth largest US retailer by sales behind Wal-Mart, Target Corp is set to face activist hedge fund manager William Ackman in a proxy fight for control of five spots on the retailer's board of directors.

The investor who heads Pershing Square Capital Management, Target's third-largest shareholder, said it plans to nominate five candidates for election to the 13-member board. The nominees include Ackman as well as Jim Donald, former chief executive of Starbucks Corp., and Michael Ashner, chief of Winthrop Realty Trust, among candidates who Pershing said are skilled in real, credit cards and real estate.

The decision to nominate the five candidates at Target's shareholder meeting came after Target's board members declined to invite them to join the board, Pershing said. Ackman has pressed for major changes at Target for months. His push for a seat on the board comes after already prodding the retailer to sell its credit-card operations and spin off the land under its stores to boost its stock. Target has said the potential value of Ackman's proposal, if any, is "highly speculative and insufficient."

"We believe that our nominees will bring insight, accountability and fresh and relevant perspectives to the Target board," Ackman said in a statement. "If elected, we believe they will substantially improve Target's ability to navigate through the current economic environment while increasing shareholder value over the long-term."

Target shot back at Pershing Square and Ackman, calling the proxy contest "costly and disruptive." Instead, Target recommended that shareholders re-elect McDonald's executive Mary Dillon, Wells Fargo Chairman Richard Kovacevich, Telstra CEO Solomon Trujillo and George Tamke, a partner at private equity firm Clayton Dubilier & Rice.

The retailer argued that the re-election of its own four nominees "is in the best interest of Target shareholders." Target did acknowledge that its nominating committee had considered endorsing Ackman as well as another Pershing Square nominee but decided against it after careful consideration.

Target Corporation is an American retailing company that was founded in Minneapolis, Minnesota in 1902 under the name of Dayton Dry Goods Company. In 1962, the first Target store opened in Roseville, Minnesota, and in 2000 the company changed its name from Dayton Hudson to Target.

It is the fifth largest retailer by sales revenue in the United States, behind Wal-Mart, The Home Depot, Kroger, and Costco. The company is ranked at number 31 on the Fortune 500 as of 2008. Target operates its retailing business exclusively in the United States. Last year it had a net income of $2.85 billion on revenues of $63.37 billion.