Target Corp. said it decided not to pursue various real-estate structure ideas proposed by activist investor Pershing Square Capital Management, calling the potential value of the deal "highly speculative."
Last month, the hedge fund led by William Ackman set forth a plan for Target to spin off the land it owns into a separate, publicly traded real-estate investment trust in order to unlock its value. Earlier this week he revised the plan to satisfy Target's various misgivings. Unlike retailers that lease most or all of their outlets, Target owns 85% of the real estate for its stores, giving it control over store designs and remodeling.
On Friday, the box-box retailer also expressed concern about the costs, strategic and operating risks and loss of financial flexibility in executing such a deal amid the current economic environment. In addition, Target again noted the proposed structure could have had an adverse impact on its debt ratings.
"Target does not share Pershing Square's perspective that execution of this proposed transaction will generate measurable shareholder value over time and believes the risks, particularly in light of the serious challenges facing our retail and credit-card segments in 2008 and 2009, are significant," Chief Executive Gregg Steinhafel said.