Pershing Square Puts Negotiations on Hold

Target Corporation (NYSE: TGT) shares moved lower after Pershing Square Capital Management announced they would defer discussions with the retailer on a potential real estate transaction until after the new year. The hedge fund’s revised transaction addressed issues brought up by Target and its shareholders, but the retailer opted not to pursue the opportunity at this time. As a result, the hedge fund agreed to wait until the pressures of the holiday season were over.

Target made the decision after a comprehensive evaluation of the various real estate structure ideas proposed by William Ackman’s Pershing Square over the past six months. A comprehensive review by the retailer along with its advisor, Goldman Sachs, concluded that the potential value created, if any, is highly speculative and insufficient to merit pursuit of the transaction after considering the cost, strategic and operating risks and loss of financial flexibility.

Pershing Square noted that they respectfully disagree with the company’s and its advisors’ present conclusions. They believe that the revised transaction would provide tremedous value and improve the company’s access to capital with minimal risk. As a result, they intend to pursue the matter in the new year, after the holiday season. Analysts tend to agree with at least one saying that the transaction would merit another careful look by the company and its advisors.

Investors may be looking for some change too as the holiday season isn’t expected to produce much of a boost. Statistics from the so-called “Black Friday” showed better-than-expected traffic with very limited buying. Cut-rate DVDs drew buyers, but worries about the economy seems to have kept a lid on purchases as the holiday season began. Shares of retailers like Target declined on the day as a result, and investors may be interested in seeing a change to unlock value.

Investors interested in placing bets alongside billionaire activist William Ackman may want to consider long-term options called LEAPS. These LEAPS allow investors to purchase stock at a fraction of the cost, which enables not only a lower initial cost but also a more leveraged position. Currently, the $35 January 2011 LEAPS are trading for just $12.90. This means that investors can purchase the right to buy 100 shares of Target at $35 for just $1,290 right now.

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