Wednesday, April 22, 2009

Pershing Square and Target

On April 6, Pershing Square Capital Management filed a preliminary proxy statement with the SEC regarding the upcoming annual meeting of Target Corp. (NYSE: TGT).

Its contentions are as follows:

"Despite the fact that Target’s two principal business lines are retail and credit cards, Target currently has no independent directors with senior, executive-level experience in these two businesses. Similarly, despite the fact that Target is one of the largest owners of retail real estate in the country, there are no independent directors on the company’s board with substantial real estate expertise. The board also has no significant shareholder representation, with the current directors owning less than 0.3% of the company’s outstanding common stock. As such, we believe that the current board is suboptimal from a shareholder and corporate governance perspective."

Pershing Square (i.e. William Ackman's) own nominees are: Jim Donald; Richard Vague; Michael Ashner; Ronald Gilson, and Ackman himself.

Target's board has 13 seats. One of them is now vacant. The incumbent board proposes to reduce the size of the board to 12 -- thus eliminating, rather than filling, the vacant seat.

If Target gets its wish in that respect, only four seats rather than five will be up for grabs at the next annual meeting. Ackman, writing to shareholders, has said: "We cannot conceive of a good reason to reduce the size of the board, for it will curtail the ability of shareholders to add strong board candidates of their choosing to the current board. As such, we urge you to vote against Target’s board reduction proposal."

One of the Pershing nominees, Ronald Gilson, has impressive academic credentials. He is a professor in the law schools of both Stanford and Columbia. [Which leads me to suspect he spends an awful lot of time flying over Kansas.] He's also the author of major casebooks covering corporate finance and corporate acquisitions.

One survey of citations in law journals puts Gilson at number 31st on the list of mostr frequently cited authors. (He's been cited 3,062 times.)

In case you're curious -- and why shouldn't you be? -- the single most frequently cited author in law jourals is Richard Posner. That fails to surprise me.