By  on April 7, 2009

Target Corp. and activist investor William Ackman continued to trade blows on Monday about the size and composition of the retailer’s board.

While the Target battle took center stage in retailing, renewed jitters about the health of banks and the apparently failed merger between technology giants International Business Machines Corp. and Sun Microsystems Inc. drove down the overall market and helped trim retail shares 1.3 percent.

Ackman, who heads Pershing Square Capital Management and through it controls 7.8 percent of Target’s stock, sent a letter urging shareholders to elect his proposed slate of five directors — specialists in the retail, real estate and credit card areas. In a filing with the Securities and Exchange Commission Monday, he described the board’s composition as “suboptimal.”

The retailer shot back, asserting: “The current Target board has the strength, diversity, experience and qualifications to provide effective and independent oversight and direction to the company.”

Shares of Target fell 3.4 percent to close at $35.45.

Another company in Ackman’s sights, General Growth Properties Inc., rose 34.7 percent to 97 cents, although the beleagured real estate investment trust said it knew of no reason for the surge. Ackman has been buying shares of the debt-laden mall operator and could retain an ownership position in the event of a bankruptcy.

The S&P Retail Index fell 4.17 points to 310, which is still 38.9 percent above its March 6 low. Falling back below 8,000, the Dow Jones Industrial Average slid 0.5 percent, or 41.74 points, to 7,975.85 as the IBM-Sun deal appeared to falter. A pickup in mergers and acquisitions would be a positive sign for the economy and one indication that price tags, at least for companies, had bottomed out.

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