UPDATE 3-Ackman asks Target to allow split proxy votes

Tue May 26, 2009 5:44pm EDT

* Ackman, of Pershing Square, seeking 5 board seats

* Says keeping personal stake at least 5 yrs if wins seat

* Target shares unchanged after hours (Updates stock, adds Pershing call for voting protocols)

By Nicole Maestri

SAN FRANCISCO, May 26 (Reuters) - William Ackman of Pershing Square Capital Management, fighting for seats on the board of Target Corp (TGT.N), asked the retailer to allow its 250 largest shareholders to split their proxy votes between his slate of dissident directors and its incumbent nominees.

Pershing Square, in a filing with the U.S. Securities and Exchange Commission on Tuesday, suggested the two sides post a letter online that the top 250 shareholders -- representing more than 75 percent of Target's outstanding shares -- could use to split their votes.

"That letter would confirm precisely which nominees each of these shareholders seeks to support," Pershing Square stated.

Ackman runs Pershing Square Capital Management, which has amassed a 7.8 percent stake in Target. He is seeking to win five seats on the retailer's board at its annual meeting on May 28, while Target is running a slate of four incumbent directors.

The board has 12 members. Ackman says it should have 13, an issue that will be voted on at the meeting.

Ronald Gilson, one of Ackman's nominees, had requested in April that the discount retailer use a single ballot for the board election to allow shareholders to choose candidates from both slates, rather than only being able to choose one group of candidates or the other.

Target opposed the request, and has repeatedly called on its shareholders to vote for its board nominees.

Earlier in the day, Ackman said that he would maintain his personal investment in the retailer for at least five years if he wins a seat on its board. Ackman said his personal stake in Pershing Square IV, his fund that is exclusively invested in Target, is now worth over $55 million.

"If I am elected to Target's board of directors, I pledge to keep that stake invested in Target for the greater of five years or my term on Target's board," Ackman said in a statement.

VOTES STARTING TO COME IN

As the annual meeting approaches, Target and Ackman have engaged in an increasingly vocal war of words, seeking to win support for their rival slates.

The California Public Employees Retirement System, the largest U.S. public pension fund, said on Friday it had voted in favor of Target's nominees. It said it owns roughly 2.16 million Target shares, or less than 1 percent of the retailer's outstanding shares.

Also last week, the State of Wisconsin Investment Board said it voted in support of all of Target's nominees. It owns roughly 2 million Target shares.

But some of Target's largest shareholders, including State Street Global Advisors, Vanguard Group Inc, and a division of Capital Group Cos, declined to comment on how they are voting in the proxy contest.

Meanwhile, the Florida State Board of Administration voted its roughly 2 million Target shares in favor of Ackman's slate. Michael McCauley, its senior corporate governance officer, said James Donald, a former Wal-Mart Stores Inc (WMT.N) supermarket executive who is on Ackman's slate, could add value to Target's board.

Target shares were unchanged after-hours from their close of $41.00 on the New York Stock Exchange. (Reporting by Nicole Maestri; Additional reporting by Mihir Dalal in Bangalore and Ross Kerber in Boston; Editing by Anil D'Silva, Tim Dobbyn, Gary Hill)

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