Target fight heats up; Biogen split seen to up sale potential; Emulex shares trade above bid

By Cristal Cody

Tupelo, Miss., May 26 - Pershing Square Capital Management LP manager William Ackman said Tuesday he would maintain his $55 million personal investment in Target Corp.'s stock if he is elected to the company's board of directors at Thursday's annual shareholders meeting.

The retailer just may end up with a mixed board of directors from both sides, an analyst told Prospect News.

In other upcoming proxy fights, Carl Icahn's goal to split Biogen Idec Inc. is designed to woo buyers not capable of digesting the entire biotechnology company, an analyst said in an interview Tuesday.

Also on Tuesday, Emulex Corp. chief executive Jim McCluney urged shareholders to reject the $764 million, or $9.25 a share, hostile takeover offer from Broadcom Corp.

Meanwhile, stocks rallied Tuesday to close up after the holiday break.

The Dow Jones Industrial Average gained 196.17 points, or 2.37%, to close at 8,473.49.

The Standard & Poor's 500 index rose 23.33 points, or 2.63%, to 910.33, while the Nasdaq Composite index added 58.42 points, or 3.45%, to close at 1,750.43.

Ackman's Target stake

Ackman said Tuesday he would keep his Target investment for five years or the duration of his tenure on the board. Ackman has five nominees, including himself, against the retailer's own four incumbent nominees to Target's board.

In the statement Tuesday, Ackman noted that Target's board and management sold $430 million of Target stock in the five years before he launched the proxy fight in March.

"As a result, the non-management directors who serve on Target's board own less than 0.02% of the company in common stock," Ackman said in the release. "My personal stake in Pershing Square IV, a fund exclusively invested in Target, is now worth over $55 million."

As for the additional 7.80% of outstanding Target shares owned by New York-based Pershing Square, Ackman said, "I expect these other Pershing Square funds will also be long-term owners of Target subject to investment concentration limits and other factors."

However, as reported at the end of Ackman's press release, "Pershing Square has and in the future may increase, decrease, dispose of, or change the form of its investment in Target Corporation for any or no reason."

Ackman launched the proxy fight after Target turned down his idea to spin off its land and buildings into a real estate investment trust to regain shareholder value. Target operates 1,698 Target stores in 49 states.

"He's trying to prove he's in this for the long haul [and that he's not] just in it for the short term to make some money back he's lost," Joe Feldman, an analyst with Telsey Advisory Group LLC, told Prospect News on Tuesday.

"My sense is that most people have probably made up their minds at this point, though I'm sure there are votes left to be had," Feldman said. "I wouldn't be surprised to see a combination from his nominees and Target."

Minneapolis-based Target said Friday it will not broadcast the shareholders meeting, which will be held inside a new store in Waukesha, Wis.

Proxy advisory firms RiskMetrics Group, Inc. and Proxy Governance, Inc. have recommended shareholders elect two of Ackman's nominees, while Glass, Lewis & Co. recommended in favor of all of Target's nominees.

Target shares rose 26 cents, or 0.64%, to close Tuesday at $41.00.

Biogen/Icahn fight

Biogen said Sunday that Proxy Governance and Glass Lewis recommend stockholders vote for all its nominees at the June 3 annual shareholders meeting and reject billionaire investor Carl Icahn's four nominees.

RiskMetrics Group has recommended investors vote for two of Icahn's nominees.

Icahn said on May 11 that Cambridge, Mass.-based Biogen should split up its cancer and neurology drug operations.

The plan probably would unlock potential buyers' purse strings, analysts said Tuesday.

Hamed Khorsand, an analyst with BWS Financial Inc., told Prospect News on Tuesday that the Biogen of today is what makes the company valuable.

"He thinks the best way to recognize that value would be breaking the company into a couple of pieces and selling in that format," Khorsand said. "It would make sense if you're looking to broaden the scope of who can buy the company. There's not too many suitors capable of digesting Biogen and tack on a premium that Biogen would deserve in a takeout."

Carol Werther, an analyst with Summer Street Research Partners, said in an interview Tuesday that she rates Biogen's stock as "sell" because of a gap in the company's drug launch timeline.

"Biogen is a well-run company with an interesting pipeline," she said. "But you don't get a lot of credit for your pipeline because the market doesn't know how to evaluate it."

Market observers expect that if Icahn is successful in his proxy fight, he will follow through on intentions to split the company in half.

"If he wins the proxy battle, I think he intends that to happen at some point," Werther said.

Biogen shares gained 85 cents, or 1.69%, to close Tuesday at $51.24.

'On the cheap'

In a letter sent Tuesday to shareholders, McCluney also asked Emulex investors to reject Broadcom's consent solicitation, "which aims to ultimately remove Emulex's entire board of directors and appoint in its place nominees hand-picked by Broadcom, who Emulex believes will accept Broadcom's grossly inadequate offer."

Irvine, Calif.-based semiconductor maker Broadcom launched a tender offer on May 5 for Emulex, a Costa Mesa, Calif.-based storage networking infrastructure provider. The tender offer expires on June 3.

The hostile offer is an "attempt to acquire Emulex on the cheap," McCluney said in the letter.

Broadcom said in a statement sent to Prospect News on Tuesday that the consent solicitation would give Emulex shareholders the right to call a special meeting to address issues.

"We urge Emulex shareholders to remain focused on the central issue: that they deserve the right, which the Emulex board of directors would deny them, to decide for themselves what they think of Broadcom's all cash, $9.25 per share offer," Broadcom said. "Emulex's market share has been stuck on hold for years."

Shares of Emulex continue to trade up on expectations of a higher bid.

"There's lots of rumors out there," an analyst said Tuesday.

Shares of Emulex closed up 11 cents, or 1.02%, at $10.88 on Tuesday.

Broadcom's stock added 64 cents, or 2.88%, to close at $22.89.

Mentioned in this article:

Biogen Idec Inc. Nasdaq: BIIB

Broadcom Corp. Nasdaq: BRCM

Emulex Corp. NYSE: ELX

Target Corp. NYSE: TGT

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