Ackman resigns from JC Penney board
Associated Press | 8/7/2013, 3:29 p.m.
PLANO, Texas (AP) _ The boardroom drama may be over, but J.C. Penney is still grappling with an uncertain future.
William Ackman has resigned from J.C. Penney's board as part of a deal to resolve an unusually public battle between the activist investor and the struggling department store operator.
Ackman's departure could provide some relief from a battle that became a distraction while Penney has been working to fix its ailing business. But investors pushed shares down in morning trading as they focused on Penney's long-term struggle to turn business around.
The decline also reflected worries that Ackman might sell shares. Ackman's Pershing Square Capital Management is Penney's biggest stockholder and owns 17.7 percent stake or about 39 million shares. CNBC quoted Ackman as saying that he had no immediate plans to sell.
Ackman went public last week with statements saying he'd lost confidence in Penney's board and that Chairman Thomas Engibous should be replaced. Ackman and the retailer's board also were bickering over how quickly the company should replace CEO Mike Ullman.
On Tuesday, Penney named Ronald Tysoe as a director to fill Ackman's seat. Tysoe is former vice chairman of Federated Department Stores Inc., which is now Macy's Inc. Penney will name an additional new director in the near future.
Ackman said in a statement that the moves were "the most constructive way forward'' for the Plano, Texas, company and all parties involved.
The departure doesn't do much to reverse Penney's declining business, which is trying to lure back shoppers turned off by a reinvention plan formulated by a former CEO backed by Ackman.
"This was just a sideshow,'' said Brian Sozzi, chief equities strategist for Belus Capital Advisors. "The fundamental issues of the company are nowhere near fixed."
In a note to clients published Tuesday, Michael Binetti, an analyst at UBS Investment Research, wrote that the "fundamental outlook remains concerning.'' That leaves UBS unsure of who would buy the 39 million shares or "at what price the stock would change hands.''
"Pershing's potential sale is likely to remain a significant stock overhang'' in the near term, Binetti wrote.
Penney's board also made it clear that it continues to support Ullman, who was brought back as CEO in April. Ullman had previously served as Penney CEO from 2004 to 2011.
The resolution caps several days of boardroom drama where Ackman went public with two scathing letters to the board. In them, he noted that the board has "ceased to function effectively.'' He also questioned the board's hiring and firing practices and "aggressive'' inventory purchases.
Engibous fired back in a pair of releases saying that Ackman's comments were "misleading, inaccurate and counterproductive.''
The boardroom brawl even had Howard Schultz, Starbucks founder and CEO, weigh in. He sided with Ullman and called Ackman's actions "disgusting.'' Schultz is not a Penney shareholder, but Ullman sits on Starbucks' board.
Ullman had replaced Ron Johnson, who was ousted as CEO after 17 months because his radical makeover led to massive losses and sales declines.