Wednesday, January 26, 2011

JC Penney (NYSE:JCP) Responds to Activist Investor, Making Changes

JC Penney (NYSE:JCP) responded to activist investor Bill Ackman by instituting some quick changes and name him and ally Steven Roth to the board of directors of the company.

Canaccord says, "JC Penney shares surged as the retailer announced plans to close underperforming stores and named activist investor Bill Ackman and ally Steven Roth to its board of directors. Ackman, who has a history of lobbying companies he holds a stake in to initiate change, announced in October that his Pershing Square Capital Management had a 16.5% share in the company, while Vorando Realty Trust, where Roth serves as Chairman disclosed a 9.9% share. The announcements increased pressure on CEO Myron Ulman III to turn the firm around, as competitors such as Macy’s (NYSE:M) and Kohl’s (NYSE:KSS) have begun to encroach on their frugal customer base. In response, the company had put a poison pill in place to prevent investors from acquiring more than 10% of outstanding shares and to prevent existing large shareholders from increase their stake in the company. Ulman said there were no plans to remove the pill, but emphasized than an acrimonious relationship with Ackman would not provide benefit to any of the parties involved and called Ackman 'one of the most capable investment minds that exists.' Plans were announced to close six stores along with nineteen outlet stores across the country; and to close two of its five call centres. The company anticipates these changes should boost EPS by $0.07 by 2011. The impact to employees has not been announced. JC Penny will present their plans for growth in 2011 during their fourth-quarter conference call scheduled for February 25."

J.C. Penney closed Tuesday at $32.13, down $0.39, or 1.20 percent.

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