Target said it hired investment bank Goldman Sachs to help it consider the best ownership structure for its credit card receivables. They will examine possible differences in growth rates and credit risk between the current arrangement, in which Target owns the receivables, and alternatives. The review will also look at the cost of debt and equity capital that Target needs to fund its receivables, the company explained.
"Given our objective to create substantial shareholder value over time, we plan to approach the capital markets to determine whether Target or a financial institution is better suited to own our receivables," Target's Chief Financial Officer Doug Scovanner said in a statement.
Target's move comes almost two months after Ackman, head of activist hedge fund firm Pershing Square, disclosed a stake of roughly 10% in the retailer. Ackman said in a regulatory filing that the company's shares were "undervalued" and added that he planned to talk with Target's management about ways to change the situation. At the time, analysts said he could propose the sale of the company's credit card business.
Full story at Marketwatch.
For more on retailer credit card operations, read a story we ran in April.