Ackman Plays

" We're here once again with our special guest hedge fund giant bill Ackerman he's talking with us right now about his plan for the retailer target as well it's the state of some of those other investments. And -- you came out with this yesterday this plan they have for target which is a company you've been long infer sometime you own just under 10% of company announced correct. Okay -- versions where owns just under 10% of the company what is your plan to try and none do what you think is unlocking value here."

" Turn our our -- more than unlocking value -- part of our goal is to ensure that target has the access to capital needs to grow its business going forward. So what we're doing -- actually it was described -- songs from articles complicated transaction I think it's actually pretty simple what we're doing is target owns the land under about 85% at stores. Target contributes -- to a new company it spins off the company's shareholders the company elects REIT status. And target commits to pay rent the accompanying this can be collects rent and pays dividends to its shareholders that's really the essence. The transaction and what happens is pumped right now target is funding its growth which requires a substantial capital from MasterCard spent a 1000000003. On land plus all the costs associated with getting a land through the approval process. What we're doing -- for transferring those cost for an -- company. A new company to conduct this is designed to own plants because it's a real semester it's not going to pay taxes so. Taurus and paid billions for ranch to this new company for the -- longer have the obligation to fund their land costs. Going forward Sears save -- including three Lester I think there even with cutting back conserve -- an extra punishment and a billion won. Qatar's going to get a deduction now for the rents so did and a billion -- they gonna it's only the after tax amount that they're going to have to pay. We're seeing a target no one really needs to pay dividends were -- in particular dividend -- to a penny a year just to pay a nominal dividend to reach competitiveness. So target can save another. 400 plus million dollars and dividend payments so actually what happens as a result this transaction. Targets after tax cash flow goes up. I 600 million a year and have a partner that's going to finance them going forward the industry -- leopard. And it's and people -- nervous coverage today we design -- to -- the best treatment country frankly it's not doing and asking. Come -- it's that it doesn't pay taxes. Why is an unusual number one as having no stunt this entire -- reefs are personally investors -- get the dividend and pay taxes there isn't a loss. The government just a much more efficiently with a lot of company and recently with us for 45 years and I don't think that's going to Clinton when when we net not a government. Internet depends on ethics and it targets and pay less taxes. -- corporate taxes and depending on who owns the stock. There may be more or less. Taxes -- we paid for the treasury it's owned by individuals are going to pay it what kind of dividend from every present donated dollar her 85 shares of targets dividends going to go from. Sixty cents to a dollar and six but the difference or come largely from the streets can reach a much better position to pay dividends and -- targets financial picture. In terms of their ongoing. Capital requirements are -- down the free cash was going to go up. They're going to have a very well capitalized partner is going to buy their land going forward. -- is so well accomplice is a start -- would know -- and number two instances owns the land under every target. Targets never going to default on payments because if they default the landowner gets the building right in this case the buildings are worth between billion dollars so it's almost like. A ground lease with a twenty billion dollar. Deposit from the tenant the tenant and it's never default on ground leases particularly ones like this on Saddam -- very very safe and did you make a minute or two I can just take you through the whole thing."

" Where do that let's just point out quickly that are more just price to me that as an hour later -- this week because of the difference in daylight savings between here in the UK. 319. From 342. Are yesterday on three month dollar -- the improvement in comparison there. That's great news I think it is shows I think the commercial paper facility really is making a difference here."

" Our social because my -- I had -- you know ancestor -- okay so. Clinton company contribute plans target -- for the no longer -- isn't painful dividend targets -- deduction. -- for the Renta pays in the refunds they're growth. I'm going forward -- we itself is very safe. Because it owns the land under restore and in addition to target which is a strong credit and getting the buildings as collateral they were at -- Purcell never default on paying the rent. And there's a big dividend and then the other thing we didn't I think you might find its interest in -- the rent payment. We're calling this the target. Inflation protected -- okay and it's going to pay dividends twice a year January 15. In July 15 those happen to the days of the treasury inflation protected security pays its interest and and the rest is going to go up by CPI. Over time so investors. -- many people -- concerned about inflation future and you can look to your your point of view on this but all the you know Clark capital the government's putting into the capital markets today I think it ultimately inflationary."

" Stunning let me ask you this and it just looking at this glancing -- and I thought wow this doesn't seem to make a lot of sense for target the company because you take everything good out of target why would anyone buy target shares emptiness of it's not going to paying a dividend anymore it has huge lease payments that are coming out. Why would someone I can understand why you may think it's good for target shareholders' right now especially if you're on almost 10% but why wouldn't be good for it why would anyone buy target shares after that."

" Sure. Well actually. More people interest in -- after listeners more for soul but it is not some districts get rich quick -- right on in different Fisher receiving every spin off. I'm still going to own. We want to larger shareholders of target corporation's -- I don't do anything here that's great for the streets and bad for target. That that the measures that people look like look out when that draws the line of business. Are principally its return on invested capital. And it's puts its growth and earnings over time. Targets return -- invested capital as an almost double as a result of the transaction. Okay under the tube and it's free cash flow and other big driver value is going to increase very significantly target does not generate very much if any for cash flow historically. Particularly after paying dividends. Number three the company's growth rate. I think yes. Earnings per share basis is going to go from the mid fourteens. To the mid 72 that incremental free cash flows and help the higher returns on capital going to drive earnings growth and higher earnings growth. You're going to have more free cash flow you're gonna pay less taxes. So it's going to be a supercharged target that you will."