(Adds Target response, analyst)
By Brad Dorfman
CHICAGO Oct 28 Target Corp (TGT.N) shareholder
Pershing Square Capital Management said it will unveil a
potential transaction to boost the company's value, sending
shares in the discount retailer up as much as 11 percent on
Pershing said it would present the plan at an event in New
York City on Wednesday that it described as being "of
particular interest to investors and analysts focused on
retail, real estate, fixed income and credit."
Pershing, a hedge fund run by William Ackman, has built a
position of just under 10 percent of Target's shares since
taking an initial stake in April 2007.
Target said Pershing had raised several ideas for changing
the ownership structure of its real estate assets since May.
Target said it is reviewing the ideas and hired Goldman Sachs
(GS.N) as an advisor, but noted the proposals have raised
"serious concerns on a number of important issues."
"We respect the spirit with which these ideas were
presented and will share our perspective with the financial
community in the near future," CEO Gregg Steinhafel said in a
Officials at Pershing were not available to give further
details on the proposal or their discussions and a Target
spokeswoman declined to give details on discussions with an
Target's business has faltered in the past year as a
deteriorating economy leads shoppers to cut back on buying
items such as clothes in favor of necessities such as food and
In August, it reported its fourth-straight quarterly profit
decline even as larger rival Wal-Mart Stores Inc (WMT.N) saw
profits rise from consumers seeking bargains.
The retailer has scaled back store-opening plans and taken
a tougher stance on its credit cards, but that has not stemmed
a 44 percent drop in Target shares since a recent high in
Ackman has explored other proposals to try to increase
Target's share price. During a Target meeting with investors
last week, Ackman asked executives a question about a potential
derivatives transaction he said would let Target effectively
retire more of its own shares.
Another possible idea is that Ackman would propose some
sort of sale and lease-back transaction for Target's real
estate, said Morningstar analyst Joseph Beaulieu.
He noted that Ackman was already able to persuade Target to
sell a large interest in its credit card business to JPMorgan
Chase & Co (JPM.N) earlier this year. That operation has
presented new risks to Target in recent weeks as more credit
card loans go bad.
John Griffith, Target executive vice president-property
development, said at last week's meeting that Target owns 85
percent of the real estate parcels on which it builds new
stores. That allows it more control over design, expansion and
remodeling decisions for the stores, he said, according to a
Target shares were up $2.77 at $35.46 on the New York Stock
Exchange after trading as high as $36.28 earlier in the
(Reporting by Brad Dorfman; Editing by Brian Moss and Andre