Pershing Square scored a significant win Thursday in its ongoing proxy fight – the “most expensive of all time” – with Target Corp.
As today’s FT reports:
Target, the US discount retailer, has suffered a setback in its efforts to stave off a challenge to its board by activist investor Bill Ackman, after a leading proxy advisory services endorsed two of the dissident candidates.
Proxy Governance recommended that its clients vote for two of the five nominees supported by Mr Ackman’s Pershing Square funds – Jim Donald, the former chief executive of McDonald’s, and Michael Ashner, a real estate executive.
Not only in fact, did Proxy Governance endorse two of Ackman’s five ‘rebel’ candidates for the board, they also endorsed his proposal to have the board expanded in size.
Separately, the proxy advisory arm of rating agency Egan-Jones, also swung in behind Pershing Square. Egan-Jones recommended shareholders withhold votes from two Target board incumbents over questions of “independence”.
Selected highlights from the Proxy Governance report:
On director experience
Particularly in their arguments that thin director experience in areas of increasing strategic importance has led to suboptimal strategic outcomes, the dissidents [Pershing Square] make compelling points.
On Target’s credit cards financing deals:
[T]he enduring strategic question, though, is not whether to sell or keep the [credit card] business but how to mitigate the substantial risk and capital intensity of a non-core business. To the extent the dissidents, rather than the board, were driving that question in 2007 and 2008, the dissident argument that director experience could be better aligned with strategic challenges seems credible.
On real estate and food retailing:
The real strength in the dissident campaign, however, lies in the nominees, whose professional experience is directly relevant to certain strategic challenges the company faces (particularly outside its core retailing operations) yet which seem to be under-represented in the board as currently composed.
The advisory service added that the Pershing Square nominees would “add meaningfully to the current board’s composition” and “ability to assess and meet emerging strategic challenges.”
Related links:
The moving Target – FT Alphaville
Ackman’s Gekko moment – FT Alphaville