Ackman goes to town on Target

On Monday, William Ackman, president of hedge fund Pershing Square, held a "town meeting" in Manhattan and broadcast on the Internet to present his case to shareholders of Target and encourage them to elect new directors that he called more experienced and more independent than current members of Target's board who are up for reelection.

In his hour-long presentation, Ackman says that Target does not have the proper structure for its credit card operation and that the company should offload the credit risk to a bank or other financial institution. He also notes that among retailers, Target owns the most real estate and claims that the company has several options to monetize its real estate assets. Third, he points out that Target missed the boat on grocery sales and, as a result, cannot challenge Wal Mart in that category. The directors endorsed by Ackman has extensive operating experience in those three key disciplines.

What's innovative here is Ackman's use of the town hall format. The meeting was open to anyone interested and during Q&A questions were fielded from the audience and from those viewing the webcast. This degree of transparency is fairly unique in the realm of proxy fights and marks a continuation of Ackman's earlier pledge to be more public about issues facing his business and the hedge fund industry.

From a communications perspective, Ackman dedicated part of his presentation to systematically countering recent claims Target has made against him. He also took pains to praise Target's management and positioning his beef with the board as one focused on independence and receptivity to new ideas intended to enhance shareholder value. Most noteworthy, he was clear that shareholders have a choice among directors and that voting for one or more of those endorsed by Pershing Square does not require them to vote for Ackman himself, who is also on the alternative slate.

In all, it was an effective presentation of a business argument and the event went a long way to refuting Target's claim that this proxy fight is all about Ackman and his fund's short term interests.

Update: In a move that The New York Times calls "unusual tactic in proxy fights, but one the company feels it must make in order to win over shareholders," Target is fighting back by issueing its own presentation that tries to discredit the nominees supported by Pershing Square.