A new CEO always makes some changes. Will Steinhafel look closer at Pershing Square’s proposal?
Here is the news:
Target Corp. said chairman Bob Ulrich will retire at the end of the month, and will be succeeded by Chief Executive Gregg Steinhafel, completing a transition that began when Mr. Steinhafel was tapped for his current post a year ago.
Mr. Ulrich will become chairman emeritus, the retailer said.
The 53-year old Mr. Steinhafel joined Target in 1979 and became president in 1999. Target announced last January that he would succeed Mr. Ulrich as CEO, although he didn’t take the reins until last May. He was named to the board two years ago.
Mr. Ulrich has spent his entire 41-year career at Target and its predecessor company, Dayton’s, starting as a merchandise trainee. He became its president in 1984 and chairman and CEO three years later. Mr. Ulrich is credited with creating Target’s “cheap chic” marketing strategy some 20 years ago.
Like so many other retailers, Target has been struggling with slackening sales as shoppers rein in discretionary spending in the face of the housing-market collapse, the financial-markets meltdown, gyrating gasoline prices and tight credit. Last week Target said its December same-store sales fell 4.1%, in line with its expectations. But it said that markdowns “pressured profits.”
In addition to slowing sales, Target’s profits have suffered as an increasing number of its shoppers default on credit-card payments.
“As we look to the future, we are completely confident in Gregg’s leadership and his ability to build on Bob Ulrich’s legacy by continuing to deliver a superior guest experience,” said Vice Chairman Jim Johnson.
Now, let’s look back at the proposal from Ackman:
The plan was endorsed by Lazard.
Target (TGT) is facing increasing credit card losses on it portfolio. It should be noted that these losses are smaller that would have been had they not listened to Ackman and sold 1/2 the portfolio to JP Morgan (JPM).
What the transaction proposed by Ackman does (listen to the presentation for more detail) is frees up a very valuable commodity right now for any retailer….cash. It lowers land acquisition costs for expansion, increases cash flow to the retailer, lowers capex costs and more.
What is not clear was why the Ackman deal was really declined. Here is the press release put out at the time.
Here is the interesting part. When this was issued, Ackman’s reply was that he would “wait until after the holiday’s to address concern’s with management”. Now we see Ulrich retire. Are the two actions related? Was Ulrich standing in the way of the deal and did he hold sway over management and the rest of the board? Did Ackman know this was coming and was this the reason for his dropping the issue for the time being?
Disclosure (“none” means no position):None
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