Major Execs Join Target Board; Co. Closes Credit Card Biz Sale
Target Corporation said Wednesday that it has added two prominent executives to its board—Ecolab’s Douglas M. Baker, Jr., and Yahoo!’s Henrique De Castro.
Meanwhile, in a separate announcement made that same day, the Minneapolis-based retailer announced that it has completed the $5.7 billion sale of its consumer credit card portfolio to TD Bank Group.
The board appointments are effective immediately. Baker is a 24-year veteran at St. Paul-based Ecolab and currently serves as chairman and CEO. Meanwhile, De Castro joined Sunnyvale, California-based Yahoo! in November as chief operating officer—and before that, he held various leadership positions at Google.
“As Target continues to explore and seize profitable new opportunities in a rapidly-changing environment, we expect to benefit greatly from their organizational, operational, and strategic insight, their significant global experience, and perspective, and their unique leadership and digital expertise,” Target Chairman, President, and CEO Gregg Steinhafel said in a statement.
The sale of the consumer credit card business has been in the works for some time. In October, Target revealed that it had agreed to sell the business to Toronto-based TD Bank Group at a sale price equal to the gross value of the outstanding receivables at the time of closing. Target said at the time that the deal was expected to close in the first half of 2013.
As part of the deal, Target and TD Bank entered into a seven-year agreement under which TD Bank will underwrite, fund, and own future Target credit card and Target Visa receivables in the United States; it will also control risk-management policies and regulatory compliance. Target, meanwhile, will continue to service credit card accounts—and the company said that it will “continue to earn a substantial portion of the profits” generated by its credit card portfolio.
The deal will not affect Target Red Card credit card holders, who receive a 5 percent discount on Target purchases.
In its first fiscal quarter, Target expects to record a pre-tax gain of roughly $393 million on the sale of its portfolio. The retailer said that it will apply approximately 90 percent of net proceeds from the transaction to reduce its debt position and plans to use the remainder to repurchase shares of its stock over time.
Target began pursuing a sale of its credit card business two years ago. The company announced in January 2011 that it intended to sell its credit card receivables portfolio, then said four months later that it had identified challenges that could hinder or delay a sale. In January 2012, the retailer temporarily suspended its efforts to sell the portfolio, saying that it had determined based on discussions with potential partners that it was “not in its best interests to finalize a transaction” at the time.
Target did, however, say in January 2012 that it planned to re-engage in discussions with a limited number of potential partners later in 2012 and believed that a transaction could occur in late 2012 or early 2013—about a year later than originally expected. It then struck its deal with TD Bank Group last fall.
Target shares were trading down about 0.1 percent at $67.44 mid-morning Thursday.
Separate from the announcement about the sale of the credit card business, Target said that Terry Scully, president of financial and retail services, plans to retire in March 2014. On April 1, he will transition into a strategic advisory role in an effort to ensure a smooth transition for Target’s financial services operations following the sale.
Scott Kennedy, who now serves as vice president of pay and benefits, will succeed Scully. He joined Target in 2005 and assumed his current role in 2010.
Target is Minnesota’s second-largest public company based on revenue, which totaled $71.9 billion for the fiscal year that ended February 2—up 5 percent from the prior year. It operates 1,784 stores across the United States and opened its first three Canada stores last week, with plans to open 24 Canadian stores this month.