Activist investor William Ackman has tailored his proposal to spin the land on which Target Corp. stores sit into a separate real estate investment trust, or REIT, to better address the retailer’s concerns.
Ackman, whose Pershing Square Capital Management LP controls just under 10 percent of Target shares, proposed on a conference call Wednesday “test-driving” the REIT with a minority stake initial public offering of less than 20 percent valued at about $5 billion.
In a presentation last month, Ackman suggested a complete spin-off of the land as a way to raise Target’s stock price, which he considers undervalued. That idea raised concerns at Target about the retailer’s credit rating, financial flexibility and the potential for the deal to distract management.
In the revised transaction, Target would create the REIT, go through with the minority IPO and sell off the remainder of its credit card receivables business before putting more of the REIT’s shares on the market.
Target could then use $3 billion of the $5 billion raised by the IPO, another $4.4 billion from the credit card sale and additional cash from operations to pay down $9.2 billion in debt, Ackman said. The moves would allow Target to maintain its top-grade credit rating, he said.
The company has sold 47 percent of its credit card business to J.P. Morgan Chase & Co. since 2007.
“We think the sooner the company does this, the better position the company is in to take advantage of market opportunities and the better the balance sheet is for the company,” Ackman said.
Target was examining the proposal. “Our analysis is still in process, no decision has been made and we will share our conclusions once the analysis is complete,” a spokeswoman said.
Ackman estimated Target could be ready for the IPO by late in next year’s third quarter, and it would take about another year for the company to be ready to spin off the REIT entirely. Should Target decide against the move after the IPO, Ackman suggested it could buy back shares at a rate agreeable to investors.
Assuming the spin-off of the remaining 80 percent interest occurred in 2010, Ackman said the revised transaction would increase the combined stock price of the two public entities to $79 from $37 by that year.
The proposed REIT would lease the land back to Target under a 75-year master lease agreement that would be tied to the inflation rate. The Minneapolis-based retailer owns about 95 percent of its stores and roughly 85 percent of the land under them. The new REIT would be the largest in the country.
Target shares fell 10.3 percent to $26.96 Wednesday as the Standard & Poor’s Retail Index dropped 7.1 percent overall.
“Some investors are concerned about timing given the markets, others are concerned given Target’s less than enthusiastic reaction,” said Todd Slater, equity analyst at Lazard Capital Markets. “I think Ackman’s plan has many merits.…It’s clearly proactive
In yet another fashion show shuffle, @elleryland is moving its show in sync with the Paris couture calendar — though the brand is still keeping one foot on the city’s ready-to-wear schedule. Their runway show in January will coincide with the launch of a new strategy: designing two main collections each year instead of four, which will then be released in four drops. “As we all know, the system needs to change. We need to show sooner to give time back to artisans and designers to do what they do best — create,” said founder Kym Ellery. #wwdnews #wwdfashion (📷: @kukukuba)
@maxmara’s classic 101801 coat was the cornerstone of its pre-fall 2018 collection. The design team expanded the traditional double-breasted, kimono-sleeved style into a trapeze coat, lean belted styles and a peacoat and presented them in monochromatic looks – like the camel one pictured here. #wwdfashion #prefall18 (📷: George Chinsee)
The @cfda has shifted the dates of #NYFW, with Men’s showing on February 5 through February 7, and Women’s will directly follow, running from February 8 through 14. The preliminary schedule will be released on the CFDA’s web site in the next few days, but Mark Beckham, VP of marketing for the CFDA, revealed that @rafsimons will be back to close the men’s-specific part of the week with a show on February 7 #wwdfashion (📷: Kelly Taub)
@ferragamo is introducing a new space dedicated to the development of women’s and men’s leather good samples. The laboratory, which is created eco-friendly materials and designed to reduce the environmental impact of the manufacturing processes, will allow the company to expand its accessories offering through traditional artisanal approaches. #wwdfashion (📷: @aitorrosasphoto)
How does a “regular, degular, schmegular” girl from the Bronx, N.Y., become a Grammy-nominated artist with a certified platinum record in less than a year? Call it the @iamcardib come up. The 25-year-old has become a musical sensation, and the fashion world is taking note. “If I could describe her style I would say drama. She’s really into the dramatics,” says Cardi B’s stylist @kollincarter. See how Carter styles her bold and out there looks with the link in bio. #wwdfashion
“There is no formula. There is no guideline. I can watch Ted Talks all day, but there is no one who can advise me on exactly what it is I should be doing,” said @ronniefieg, CEO of @kith, in an interview with WWD’s @ariahughes at the brand’s new SoHo office in Manhattan. Head to WWD.com to see how Fieg went from hanging out in shoe stockrooms at 13 to building his own business. #wwdfashion (📷: @weston.wells)
@fearofgod and @maxfieldla have teamed up on a pop-up installation. The store, located in the gallery space across from Maxfield’s Melrose Ave location, is the site of the brand’s House of God pop-up in which Fear of God founder @jerrylorenzo has created a church-inspired installation. A dozen vintage church pews sit in front of an LED screen playing 90s gospel singers in an effort to re-create an environment akin to a Southern Baptist Church, Lorenzo explained. Read more about the pop-up on WWD.com #wwdfashion (📷: Jennifer Johnson)
Known for his sleek, sophisticated American glamour, Norman Norell is the subject of an upcoming exhibition at @fitnyc. “Norell: Dean of American Fashion,” which runs from February 9 through April 14, will feature approximately 100 ensembles and accessories. His best work is exemplified by the designer’s glittering “mermaid” gowns frosted with thousands of hand-sewn sequins – like the one pictured. (📷: William Helburn) #wwdfashion
For pre-fall 2018, @balmain didn’t let go of the glitz. A crystal embroidered baseball jacket priced at around $40,000 hangs in the “couture” section of the brand’s first men’s pre-collection. Sporting the words “Balmain Army” across the back, the item took around two months to make. “When it was completed, it was like Christmas, it was like, ‘It’s done, it’s exactly what I wanted,’” said Balmain’s creative director @olivier_rousteing during a tour of the collection in a Paris showroom on Monday. #wwdfashion