Ackman loses in Target proxy contest

By Nicole Maestri

WAUKESHA, Wisconsin (Reuters) - Target Corp (TGT.N) shareholders dealt a blow to activist investor William Ackman on Thursday, rejecting his slate of proposed directors and voting instead to keep four incumbents on the retailer's board.

Despite a tearful appeal in which he invoked Martin Luther King Jr.'s famous "I Have a Dream" speech in a final effort to win votes, Ackman did not come close to gaining any seats on the board.

Target, which spent roughly $11 million defending itself during the proxy contest, said that, based on a preliminary total, each of its four nominees received support from more than 70 percent of the shares voted.

Each of the five nominees on Ackman's slate received support ranging from the high-single digits to the low 20s in terms of the percent of votes cast, the retailer said.

Target also said shareholders voted in its favor to set the board size at 12. Ackman wanted it set at 13.

"We're disappointed," said Ackman, whose Pershing Square Capital Management has a 7.8 percent stake in Target, of the results. "We'd love to be on this board, but shareholders voted."

His said a pledge made earlier in the week to remain a Target shareholder for five years was conditioned on winning a seat on Target's board. With no seat on the board, he said he now had more flexibility with his Target holdings, although he expected to be a "long-term holder."

Target shares fell 1.2 percent, or 46 cents, to $39.14 in Thursday's New York Stock Exchange trading.

"The pressure on the stock could be over concerns that Pershing Square will sell some, or all, of its position, but we do not anticipate that will occur given that it would be damaging to Mr. Ackman's credibility," Telsey Group analyst Joseph Feldman said.

The hedge fund director launched his proxy contest in March after Target rejected his proposal to spin off the land under its stores into a real estate investment trust to boost its stock price.

He has since said he was running the proxy contest to add executives to Target's board who have expertise in credit cards, real estate and food retailing.

But Target argued he sought the seats as a way to push through his risky real estate transaction.

"Ackman certainly raised the awareness of corporate governance, and likely helped Target to be more focused than ever on this important issue," Telsey's Feldman said.

UNUSUAL STRUGGLE

The power struggle was unusual because many analysts and investors have praised Target as a best-in-class retailer with a capable management team.