Archway Cookies and Target: Contrasts in Repelling Unwanted Advances

We were never huge fans of Archway cookies, though they were often in the household growing up. If recollection is accurate, they did make a tasty lemon flavored soft cookie that the male parental authority unitoften brought home and munched on between reading the Wall Street Journal and determining the exact moment to spank us for misdeeds earlier in the day. (Thanks moms everywhere for keeping fathers in the discipline loop).

This is no cookie ode being written; rather, another small contribution to our ever continuing disappointment in how a fundamentally good concept--in this case, the private equity firm--can be used for complete evil and thus erode the stability of capitalism.  Archway was sold to one such firm, who, through lack of oversight, managed to break the company into crumbs, sans apology or recognition of misdeeds. They are in court now.

Thus, the New York Times tells us:

ALMOST as soon as he arrived at Archway in October 2007 as its director of finance, Mr. Roberts was putting out fires. Having spent the last decade working for various troubled manufacturers that private-equity firms had lassoed, he was used to the day-to-day struggle needed to keep weak companies afloat.

“I had plenty of experience with private-equity firms that highly leverage the companies they buy. The financial person is expected to keep a million balls up in the air,” he said. “There are days when you wonder if you can keep the doors open another week and then something happens and, suddenly, you’re making a profit.”

(N.Y. Times)

It is this sort of thing that makes the initiatives by people like Bill Ackman toward Target, with his desire for them to do his bidding, rather suspect. Thankfully, he failed in his efforts to take control of that company.
In the proxy fight, which cost the two sides an estimated $21 million, none of Ackman's five director candidates were elected, despite getting some support from RiskMetrics, the largest proxy research firm. Preliminary results showed that the percentage of votes in favor of Ackman's candidates ranged from the high single digits to the low 20s.

"I just look forward to refocusing," said a relieved Gregg Steinhafel, Target's CEO. Ackman, for his part, decided to declare victory, proclaiming the results "a great day for shareholders," whom, he said, would find more receptive corporate governance in other companies as a result of his campaign.

In any event, Ackman's actions mean he will not have the influence he had hoped for at Target, where he is a holder of stock and options totaling 7.8% of shares outstanding, an investment originally worth over $2 billion that has plummeted by 80% since he bought the shares in 2007. How do Ackman's investors feel about his battle? "I've been too busy to ask them," he joked after the meeting.

(C.N.N./Money)

I guess the question is whether Ackman is some sort of benign anomaly, who would buck the habits of so many firms and not attempt to suck value out of Target via financial engineering. Given his massive losses, we highly doubt it. Fortunately shareholders showed consumate wisdom. Not so much for CNN, who end their reporting with a brief ode to the "important issues" raised by the outvoted Ackman, while not being as critical as they should be.

Bottom line is Ackman got caught on the wrong side of the economy in a massive bet on Target, and having been turned down at the bank (meaning his investment in Target), he attempted to rob the banker (meaning, force Target to help him recoup his losses).