SECURITIES AND EXCHANGE COMMISSION
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PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
EXCHANGE ACT OF 1934 (Amendment No. )
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Pershing Square II, L.P.
Pershing Square IV Trade-Co, L.P.
Pershing Square IV-I Trade-Co, L.P.
Pershing Square International, Ltd.
Pershing Square International IV Trade-Co, Ltd.
Pershing Square International IV-I Trade-Co, Ltd.
Pershing Square Capital Management, L.P.
PS Management GP, LLC
Pershing Square GP, LLC
Pershing Square Holdings GP, LLC
William A. Ackman
Michael L. Ashner
James L. Donald
Ronald J. Gilson
Richard W. Vague
Roy J. Katzovicz
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Transcript Excerpt from May 26, 2009 CNBC Squawk Box appearance by William A. Ackman
On May 26, 2009, William Ackman, the founder and managing member of the general partner of Pershing
Square Capital Management, L.P., appeared on television on CNBC Squawk Box. The following is a
transcript excerpt from the appearance:
Conversation between CNBC and William A. Ackman
ANCHOR: All right less than two days away now from the Target annual shareholders meeting in
Wisconsin for what is expected to be one of the closest and most highly anticipated proxy battles
of the season and joining us now we welcome back special guest, hedge fund manager William Ackman,
Managing Principal of Pershing Square Capital Management. As usual we invited Target to join us,
but they declined our invitation. Good to see you, Bill.
WILLIAM A. ACKMAN, PERSHING SQUARE CAPITAL MANAGEMENT, L.P.: Thanks for having me.
ANCHOR: What do you make of the Barrons piece? I know that you had a quick and verbose is a bad
word, but certainly a long-winded answer to everything that Andrew Bary had to say.
ACKMAN: Sure, I mean I think that Barrons is a good publication. They lost it on this one but
what I would say is that, people are so used to proxy contests being about throwing out management,
massive changes in strategic direction, and even the press, when they write about it they miss the
point. And what this is about is not a major change in strategic direction, for Target. Its about
having the best possible board. If you think about where the failures have happened in our country
with major corporations, the banks and so on, a lot of it has to do with the fact that the boards
werent paying attention or they didnt own enough stock, or they werent particularly focused or
they didnt think about risk, and whos on the board matters. You know if you look at Target 25
years ago, they were pretty forward-thinking about governance and making sure that they brought in
fresh directors periodically. They had 12-year term limits, they separated the chairman and the
CEO roles and they didnt have a staggered board. Well, in the last period of time, they put in
place a staggered board, they combined the Chairman and CEO role in one person, they went from
12-year term limits to 15-year term limits to, most recently, 20-year term limits. And, what
thats done in our opinion, its made the board somewhat insular, a bit closed to points of view
from the outside. And so what we did is we put up a slate of independent directors. Four of the
five have no affiliation with Pershing Square. Im the fifth. Shareholders can pick among which
ones they like which ones they dont like. We think the result will be a better board. And we
picked people who have relevant expertise.
ANCHOR: You know what I think the disconnect is, I think, you keep saying you dont have a problem
with management. The cases where the boards werent paying attention resulted in management
screwing up, sinking companies.
ANCHOR: over-leveraging companies
ANCHOR: In this case, its hard to see what youre saying. I guess that is because youve backed
most of managements efforts and if you look at the ten-year performance of Target, its been very
good, theyve taken on Wal-Mart maybe better than probably anyone else.
ANCHOR: So, if you dont have a problem with management then whats the problem? What do you want
the board to do once they get in?
ACKMAN: Well, actually, I have some issues.
ANCHOR: You do have some issues...
ACKMAN: With some decisions the company made whether these are -
ANCHOR: Credit card?
ACKMAN: Lets talk about that. You know, two years ago, more than two years ago I went to the
company and I said, Look, youve got this huge exposure to credit cards, credit markets are headed
in the wrong direction, this is not your core competency, you can do a partnership with a bank, you
can outsource this risk and keep the best parts of it. For several years, shareholders have been
pushing the company, and pushing the board to make this decision and it led to them to hiring
Goldman Sachs. They ran a process, and they took a baby step in the right direction. And that
baby step cost shareholders probably, you know, several billion dollars, if not more, in market
value. I would say, you know, perhaps five or six billion dollars in market value.
ANCHOR: Because they didnt take the full step?
ACKMAN: They didnt take the full step. Years ago shareholders pushed the company, you know, Ive
been on the road meeting shareholders. What they say about the company is that the companys a bit
stubborn. You know for years, people pushed the company to get out of Mervyns and Marshall
ANCHOR: Like many companies, slow moving with making big decisions, right?
ACKMAN: Thats right.
ANCHOR: You dont want to run around, sort of doing things half-cocked, right?
ACKMAN: Absolutely not.
ANCHOR: Every time an activist comes along, you know, everything they say you dont all of a
ACKMAN: Absolutely, which is why you want people on the board who are receptive to people from the
outside. And, were not putting up five Pershing Square affiliates. We think about the mistakes
the companys made. I mean, the companys now making a push in food retail.
You know Wal-Mart made a push beginning 15 years ago and has a huge advantage over Target. Would they
have been better off having a director on the board who has experience in food retailing? The
credit card industry, you know theyve made some mistakes in credit cards. Would they be better
off having someone whos an expert in credit cards?
ANCHOR: Alright, so you do have a problem with management. I mean, you want them to do something
different with credit cards, you want them to maybe do the spin-off in the REIT structure with some
of the real estate...
ACKMAN: What I want
ANCHOR: So it seems disingenuous
ACKMAN: No no no
ANCHOR: that you dont have a problem with management and you just want all boards to be, you
know, more open and less insular.
ACKMAN: Look, at the end of the day, the bottom line stops with the board. You know a problem I
do have with management is their lack of stock ownership. A problem I have with the board is their
lack of stock ownership. Look at Wal-Marts board. Theyve got a 25% shareholder who sits on the
board. The Walton family really cares what happens to Wal-Mart. Theyve got retailers on that
board, theyve got Allen Questrom and theyve got Roger Corbett. Theyve got a real estate
executive on the board. If you look at Targets board, no retail executive, no real estate
executive, no credit card executive, and no ownership. The independent directors own two basis
points of stock in the company. Theyve not done a good job creating a culture of ownership of the
ANCHOR: Now they would say Kovacevich, it would be their representative whos a credit card expert.
ACKMAN: And I would say, I agree, if you had to pick a director whos got credit card experience,
hes run a very successful bank. But that should have been the director who pushed them to get
out of the credit card business years ago. So the company has made some mistakes, and managements
made some mistakes. But I wouldnt change management, what I would do is Id add some people to
the board who have got a shareholder perspective, Id add some people
ANCHOR: And they would change management?
ACKMAN: No, they wouldnt change management. What they would do is make sure that when critical
strategic decisions come along, they were willing occasionally theyd push back. Its not clear
who was behind keeping the credit card business. It may very well have been management, it may
have been the board. But you need a board member who says, You know what, perhaps its harder for
us to compete with $8 billion of receivables when Citi has $150 billion.
ANCHOR: You may or may not be altruistic and we need better board representation in all these
companies and this is a good thing and a democratic way, Rich agrees with that, that all boards
should be looked at like this. But, lets get back to Barrons. Youre down 80% or whatever it is
in this fund thats devoted to Target. Youve got a reason for doing this, Barrons has nothing
involved. Why did they think it was such a
ACKMAN: Well first of all, they focused on my real estate idea, they didnt understand my real
ANCHOR: So Barrons did not understand your real estate idea?
ACKMAN: They didnt talk to me about it, I mean Im surprised.
ANCHOR: They got the guy from Simon Property saying this is, you know, hoping for a valuation on a
REIT is one thing and actually getting it is another.
ACKMAN: Im happy to talk about it. I mean basically, what I proposed is that Target keep its
real estate, keep its buildings, keep control over what it needs for its business, but actually
spin off a company that would own the land. A very passive business. You know Target today leases
10% of its land. And they run their business very well leasing 10% of their land. But my point is
if you put 100% of the land in a REIT, lease it back for 75 years you control it effectively
forever, more importantly you control your buildings. If you read the Barrons article it says
look, you do a sale lease-back of land and buildings and you lose control of your buildings.
Thats true and thats why we didnt propose that.
ANCHOR: They also said that, you know that, what was the point I was going to make... that it
wasnt just that they misunderstood that the building wouldnt be part of that deal. They said
that the balance sheet would be stressed, and that youd have the rent payment of $1.4 billion and
that refurbishments and youd be less flexible and prone to downgrades from rating agencies.
ACKMAN: Unfortunately its just flat wrong. What we proposed was not a transfer of the buildings
out of Target.
ANCHOR: If you did it with just the land, would the financial flexibility of the company be hurt,
would the ratings of the
ACKMAN: Not at all. In fact, what we proposed was that the company would sell a 20% interest in a
REIT that would own its land. They would take the cash, theyd pay down debt. They would then do
a partnership with their credit card business. Theyd take that cash, theyd pay down debt.
Theyd continue to generate cash as an independent business, theyd pay down debt. So that by the
time they spun off the REIT, Target would have $5 billion of debt, thats less than one times the
operating cash flow of the business, the pre-tax operating cash flow of the business. It would be
the best capitalized retailer in the country. Again its a little bit complicated. Barrons wrote
a short piece and I dont want to pick too much on Barrons, but they completely missed it. But
this proxy contest is not about a REIT idea. You know my issue with the board with my so-called
REIT idea, was not that they turned me down. Its that, I said, Look, let us work with Goldman
Sachs, if you dont like this idea, lets youve got a $26 billion dollar at cost investment in
real estate, thats very large relative to the value of the
company. Perhaps theres a more efficient way for you to own your real estate. Lets work with
Goldman Sachs and figure out the best answer for the company. What the board said is, Were not
going to authorize Goldman Sachs to do that. Were going to limit Goldman Sachs just to look at
your idea, its either up or down on your idea. Goldman Sachs is going to have their own ideas,
they turned us down, and they wouldnt look further. My point is thats not good shareholder
oversight. In my opinion, what a board should do is say, Theres merit to the fact that weve got
a huge investment in real estate. Lets come up with a better idea, lets not limit Goldman Sachs
to a very narrow reading of Pershing Squares idea. We dont have insight
ANCHOR: But is it fair for the board to say we dont want to listen to every activist investor who
comes along and say that we have to hire bankers and go explore every idea and be paying a
long-running bill on the other end?
ACKMAN: Well actually, I would say Target is paying a lot more money on this proxy contest than
they would have spending a few hours looking at a real estate idea. First of all, were not any
activist investor. We have been a shareholder of the company since April of 2007. Frankly,
theyve adopted a number of ideas weve given them. Weve had a cordial and positive relationship
ANCHOR: Probably not recently though.
ANCHOR: Until now.
ACKMAN: Weve avoided a direct dialogue with management.
ANCHOR: I just wonder why its gotten so contentious from their point of view.
ANCHOR: We hear both sides on this, its spun a million directions.
ANCHOR: They would probably say look, weve been doing a good job running this. Youve got a 3%
owner, look you may be one of the larger shareholders but its not a huge ownership you cant just
come in and run a company when you own 3% of the company.
ACKMAN: Were not trying to do that. I asked for one board seat, after 2 years working privately
ANCHOR: You dont usually get a board seat for 3% ownership do you?
ACKMAN: The board owns less than 0.27% of the stock. Right? Its our company, right? We own a
$1 billion 100 million dollars worth of stock, right? Personally, I have a very large investment
in the company. Beyond the stock investment we own some options. No different than the management
options except ours are deeper in the money and we can extend them. But, with that ownership, with
2 years of working with the company, weve been a very successful investor in retail, weve been a
successful investor generally, I asked for one board seat. And then I said, Id like one board
seat for us, and then an independent director with retail, real estate or credit card experience.
And I gave them some names and I asked for one that would be mutually acceptable. The nominating
committee, not only did they not meet with our proposed people, they just turned us down flat. And
to me thats not good governance.
If you look at Targets proxy this year, the nominating committee never met in 2008. Alright they get
paid fees for serving on this board. The nominating committee is supposed to, you know they have
four directors, five directors coming up, theyre supposed to find the best people for those slots
and they just completely skipped it. And so, I think if you, you look at businesses that have
failed, businesses fail when the board stops really paying attention. You know if you look at
George Tamke, Ill give him as an example. Hes on three other boards theyre all Clayton Dubilier
boards. Hes Chairman of two of them. The other one is Hertz they have an 18% position. Hes
been on Targets board for 10 years. Hes bought 10,000 shares, this is a very wealthy man. 10,000
shares, serving on this board for 10 years. You look at Solomon Trujillo. Hes been on the board
for 15 years. Theyre proposing him now for another term, a three-year term. Whats so special
about an Australian telecommunications executive who just stepped down. Wouldnt Jim Donald,
wouldnt Richard Vague, Michael Ashner, some of the other people weve proposed forget me. Once
again the companys made it about Bill Ackman because its easy to pick on hedge fund managers,
ACKMAN: Right, you dont have to vote for me. But this company would be better served having some
people on the board who are independent. And if you go back to
ANCHOR: Let me stop you there, Bill. Well take a quick break, and then continue the conversation
because theres a lot more to talk about.
[END OF FIRST SEGMENT]
ANCHOR: Getting back to our special guest, hedge fund manager Bill Ackman of Pershing Square,
weve been talking about this battle between you and Target and Rich Bernstein, formerly of Merrill
Lynch, talking about the broader ramifications of this fight and what could happen if it goes in
Bills direction or not.
RICHARD BERNSTEIN, FORMER MERRILL LYNCH CHIEF INVESTMENT BERNSTEIN: Well, I would say two things.
Number one is I think as investors were too focused on just Target. This is an issue in the broad
economy. Its true around the world. Its true. The corporations have become less responsive to
shareholders. I dont think theres any doubt about that. I mean you see this you know I think
people are just too focused on whether its Bill or not Bill. The second thing I would say is I
dont understand why most shareholders are not applauding this type of action because this is what
capitalism is based on. Any action puts the fire to the feet of management and to the feet of
boards will make them more competitive, more responsive. I mean this is what capitalism is all
about. Its when we become cushy and there is no boss anymore that capitalism becomes stale. So I
think were way too focused on whether its this man right here and whether its Target and the
bigger issue out there in the overall economy. I think we should be applauding people.
ANCHOR: We should be applauding activist investors instead of passive investors.
BERNSTEIN: Within reason. I mean Im not saying every yokel and his brother should
BERNSTEIN: go to a corporate board start demanding things. Thats kind of silly.
ANCHOR: Shouldnt be throwing away your proxy, Its got nothing to do with me.
BERNSTEIN: Or you throw it away for a good reason.
ACKMAN: Because most times you get it in the mail, you can vote for the guy or not. If you dont
vote for him, he still gets elected.
ACKMAN: Right. Actually, the SEC Mary Schapiro is focused on this issue. Actually Chuck
Schumer is focused on this issue. Were talking about whats called Shareholder Access. Theres
an SEC proposal open for public comment. Next year, assuming this proposal passes, Im not going
to be the only guy putting up a slate of directors for big companies.
ANCHOR: Is there a point in which you will throw in the towel?
ACKMAN: No. Im not a throw in the towel type of person.
ANCHOR: You will not walk away from this?
ACKMAN: Meaning a new election? Or with the stock?
ANCHOR: Yes, both. Both.
ACKMAN: Sure. Absolutely. If we decide that we got completely shut out. I think that sends a
pretty bad message about the companys and the shareholder bases willingness to consider ideas
from the outside. Again, it would not bother me at all if Im not elected to this board. What
would bother me if there werent two or more of our independent directors elected to this board.
ANCHOR: What will you do if theyre not?
ACKMAN: Well, Ill assess the situation, the stock price and, you know, Ill think about it pretty
ANCHOR: How much?
ACKMAN: If we think we could make a meaningful difference, if we simply get two or more directors
on this board, this may be a more profitable investment for us over time.
ANCHOR: How much? You mentioned you have a personal stake. Can you say how big that is?
ACKMAN: Yes. Well I made a commitment today. Its actually bigger than that its closer to
$100 million dollars.
ANCHOR: Is it? Why did they say $55 million?
ACKMAN: Well, I wanted to find a way that I could make a long term commitment to the company. My
main fund which the bulk of my personal capital I cant tie up I cant commit to my investors
capital for the next 5 years. We do have a separate partnership that only owns Target where I have
a separate investment. That investments worth $55 million dollars.
ACKMAN: In a press release I put out this morning, Ive committed to hold that investment for the
greater of 5 years or for as long as I sit on the board. I do that for a couple of reasons. One,
people think of hedge fund managers as inherently short term. Im not short term. I just made a
minimum 5 year commitment to the company. Two, Im separating myself in some sense from the
existing board. The existing board sold 429 and senior management 429 million dollars in stock
over the last five years and they bought zero management bought zero stock until the day after
[we announced our nomination of a competing slate]. Talk about putting feet to the fire a day
after we launch our proxy contest, the CEO bought 170,000 shares. First time in 5 years. But my
point is, I want to make clear that were long term, that were not going to push for something
risky thats going to hurt the company Im not going to sell and be gone because again, Im
going to have to commit to own the stock for so long as Im on the board or 5 years, whichever is
the longer period of time.
ANCHOR: Wouldnt it be easier to I mean they always say like building a house is such the
nightmare that its better to find something you like and buy it? Wouldnt it be easier to find a
company that you thought was well run and buy that?
ACKMAN: I think this is a very well run company. Again, I apologize for the confusion here. I
want this company to have the best possible board. By the way, having a great board here is going
to increase the probability of this business being successful for a very long period of time. And
thats what Im focused on. If I thought it was a bad company, I wouldnt invest. We focus we
invest in great companies. We invested in McDonalds a number of years ago because I thought it
was a great company but there were opportunities for it to be a better company. And one of the
ways to make Target a better company is to have a board thats more receptive to ideas from the
outside. I think they would have done you have to ask the question had Target done a credit
card transaction before we showed up, shareholders would be much better off. Theyre better off
because we showed up because we pushed them to do something.
In connection with Targets 2009 Annual Meeting of Shareholders, Pershing Square Capital
Management, L.P. and certain of its affiliates (collectively, Pershing Square) have filed a
definitive proxy statement on Schedule 14A with the Securities and Exchange Commission (the SEC)
containing information about the solicitation of proxies for use at the 2009 Annual Meeting of
Shareholders of Target Corporation. The definitive proxy statement and the GOLD proxy card were
first disseminated to shareholders of Target Corporation on or about May 2, 2009.
SHAREHOLDERS OF TARGET ARE URGED TO READ THE PROXY STATEMENT CAREFULLY BECAUSE IT CONTAINS
IMPORTANT INFORMATION. The definitive proxy statement and other relevant documents relating to the
solicitation of proxies by Pershing Square are available at no charge on the SECs website at
http://www.sec.gov. Shareholders can also obtain free copies of the definitive proxy
statement and other relevant documents at www.TGTtownhall.com or by calling Pershing
Squares proxy solicitor, D. F. King & Co., Inc., at 1 (800) 290-6427.
Pershing Square and certain of its members and employees and Michael L. Ashner, James L. Donald,
Ronald J. Gilson and Richard W. Vague (collectively, the Participants) are deemed to be
participants in the solicitation of proxies with respect to Pershing Squares nominees. Detailed
information regarding the names, affiliations and interests of the Participants, including by
security ownership or otherwise, is available in Pershing Squares definitive proxy statement.
Cautionary Statement Regarding Forward-Looking Statements
This transcript contains forward-looking statements. All statements contained in this transcript
that are not clearly historical in nature or that necessarily depend on future events are
forward-looking, and the words anticipate, believe, expect, estimate, plan, and similar
expressions are generally intended to identify forward-looking statements. These statements are
based on current expectations of Pershing Square and currently available information. They are not
guarantees of future performance, involve certain risks and uncertainties that are difficult to
predict and are based upon assumptions as to future events that may not prove to be accurate.
Pershing Square does not assume any obligation to update any forward-looking statements contained
in this transcript.