Activist Investor: Ackman Vs. Target

Ackman's plan for Target consists of four parts: (1) unlock up to $40 billion in real estate value by placing the land under the stores in a real estate investment trust structure and then leasing back the land from the REIT; (2) sell the entire credit card operation; (3) improve the quality of the board of directors; (4) close the performance gap over time with Target's No. 1 competitor Wal-Mart Stores(WMT).

Proxy Governance has supported Ackman's activist efforts and his full slate of nominees for Target's board. RiskMetrics, the more influential of the two proxy advisory firms, has recommended two of Ackman's five nominees (Ackman himself and Jim Donald, the ex-CEO of Starbucks(SBUX)). Glass Lewis, another proxy advisory firm, has rejected Ackman's nominees and supports Target's full slate.

In the weeks leading up to Thursday's vote, Ackman has taken to the airwaves to make his case. He's an exceptional communicator. He's clear, thoughtful and forceful in making his case. I don't think there's a better activist investor currently practicing today when it comes to communication skills.

Target, for its part, also has been pushing its rebuttal to Ackman's criticisms, taking 10 minutes at the beginning of its most recent earnings call to cast doubt on the Pershing plan.

What's Worked With Ackman's Campaign

1. Target's performance has clearly lagged Wal-Mart's recently, and that's relevant. Barron's includes figures in its article that show Target's total three-, five- and 10-year returns vs. Wal-Mart, Costco(COST), and the S&P 500. The results are through April 30, and cite Morningstar. The reported returns imply that Target's returns have been pretty good on a five and 10-year basis, even though they've lagged their peers in the last three years.