Target To Exit Canada
Thursday January 15th, 2015
Posted at 8:54am
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Target is leaving Canada.
As a part of that process, this morning Target Canada filed an application for protection under the Companies’ Creditors Arrangement Act with the Ontario Superior Court of Justice in Toronto.
“When I joined Target, I promised our team and shareholders that I would take a hard look at our business and operations in an effort to improve our performance and transform our company. After a thorough review of our Canadian performance and careful consideration of the implications of all options, we were unable to find a realistic scenario that would get Target Canada to profitability until at least 2021. Personally, this was a very difficult decision, but it was the right decision for our company. With the full support of Target Corporation’s Board of Directors, we have determined that it is in the best interest of our business and our shareholders to exit the Canadian market and focus on driving growth and building further momentum in our U.S. business,” said Brian Cornell, Target Corporation Chairman and CEO.
Target Canada currently has 133 stores across the country and employs approximately 17,600 people. To ensure fair treatment of Target Canada employees, Target Corporation is seeking the Court’s approval to voluntarily make cash contributions of C$70 million (approximately US$59 million) into an Employee Trust. Upon approval by the Court, the proposed trust would provide that nearly all Target Canada-based employees receive a minimum of 16 weeks of compensation, including wages and benefits coverage for employees who are not required for the full wind-down period. Target Canada stores will remain open during the liquidation process.
As part of its application, Target Canada is seeking the appointment of Alvarez & Marsal Canada as Monitor in the CCAA proceedings to oversee the liquidation and wind-down process for Target Canada and its subsidiaries. Subject to Court approval, Target Corporation has committed to provide a US$175 million debtor-in-possession credit facility to finance Target Canada’s operations during the CCAA proceedings. Target Canada is also seeking Court approval to engage Lazard to advise Target Canada in connection with the sale of its real estate assets.
“The Target Canada team has worked tirelessly to improve the fundamentals, fix operations and build a deeper relationship with our guests. We hoped that these efforts in Canada would lead to a successful holiday season, but we did not see the required step-change in our holiday performance,” said Cornell. “There is no doubt that the next several weeks will be difficult, but we will make every effort to handle our exit in an appropriate and orderly way.”
Target Corporation’s cash costs to discontinue Canadian operations are expected to be $500 million to $600 million, most of which will occur in the Company’s 2015 fiscal year or later. The Company has sufficient resources to fund these expected costs, including cash on hand and ongoing cash generation by its U.S. business.