Target Corp. said Monday it will sell nearly half its credit-card receivables to JPMorgan Chase & Co. for $3.6 billion, a move the retailer had long resisted.
Target will still run its credit card business, which includes a Target Visa card and a store card, and said customers won't notice any change. In effect, Target gets the cash and JPMorgan gets the right to a chunk of the future profits from the credit card business.
The Minneapolis-based discounter said the interest represents about 47 percent of what Target credit card customers owe. The deal is expected to close before the end of the month.
Target said in March it expected to get about $4 billion for half its credit card receivables.
Target's sale price may have dropped because "with the credit crunch it's kind of difficult to sell those kinds of portfolios. And Target, just like everybody else, has been suffering in those portfolios a little bit," said Adil Moussa, an analyst at Aite Group in Boston, which tracks financial services.
Target said it would use the money for capital investments _ generally stores _ and share repurchases.
The transaction shares the risks of Target's credit card business with JPMorgan and "provides significant liquidity to Target from a single source unrelated to debt capital markets," Target Executive Vice President and Chief Financial Officer Doug Scovanner said in a statement.
The credit card business has been a major profit contributor in recent years _ 13 percent of Target's 2007 profit.
At one time Target _ in particular, Scovanner _ had vowed to keep the receivables, saying there was no reason to jettison a profitable, growing business. But many other retailers have sold all or part their credit card operations, including Kohl's Corp. and Pier 1 Imports Inc. in 2006 and Neiman Marcus in 2005.
Investors also have been pressuring Target to make a financial move with its assets, including options like selling part of the credit card portfolio, or selling some of its real estate and leasing it back. The chief agitator has been investor William Ackman of the hedge fund Pershing Square. A spokesman said Ackman was traveling Monday and unavailable to comment.
The move comes days after Target President Gregg Steinhafel took over as chief executive from departing CEO Bob Ulrich on Thursday. Target began to review options for its receivables business in September.
Target also said that beginning in the first quarter it will report retail and credit results as separate segments.
Target announced the deal after the markets closed. Its shares fell 72 cents to end regular trading at $53.19, then gained 48 cents in after-hours trading.
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