Ackman says he may roll Target options into common

NEW YORK, May 11 - Activist investor William Ackman, who has bet big on Target Corp, said on Monday that he will be a long-term investor in the retailer and that his fund will likely convert its options into common equity.

Ackman's New York-based Pershing Square Capital Management owns a 7.8 percent stake in Target and is embroiled in a bitter proxy fight with the Minneapolis-based retailer to replace long-time board members with an independent slate.

Questions have surfaced recently about the hedge fund manager's commitment to the retailer, particularly since his Pershing Square IV portfolio, which made a huge bet on Target through stock options, has now recovered after being nearly wiped out at the start of the year.

"The options are now $8 in the money," Ackman told shareholders at a town hall-style meeting where the other four members of Pershing Square's slate introduced themselves ahead of the May 28 annual meeting.

Several people in the audience and online wanted to know if Ackman, who first started buying Target two years ago, planned to stick around for the long run or take his profit and go.

Ackman quickly tried to calm concerns by saying that the options would most likely be rolled into common shares. More important, Ackman said he was signaling his strong interest in Target by mounting this expensive and time-consuming proxy fight. As a board member, his flexibility in trading Target would be limited, Ackman said.

Target is Pershing Square's biggest single holding, and Target's share price has gained 45 percent since Ackman announced his proxy fight in mid-March, helping the hedge fund firm's flagship portfolio return 11 percent in the first four months of the year.

Ackman's Target holdings include $1 billion in common stock, or 3.3 percent of the company, and $280 million in options, 4.5 percent.