New Board Directors Could Shake Up J.C. Penney
Back in October, we wrote, "William Ackman isn’t the
type of investor to put a lot of money into a company and let management continue
to do its thing. The manager of the Pershing Square Capital Management hedge
fund is known for putting dollars into companies that he believes are undervalued
and then actively pushing for changes to increase value."
True to form,
Mr. Ackman, whose fund owns 16.5 percent of J.C. Penney, was announced yesterday
as one of the department store’s new nominees to its board. Joining Mr. Ackman
among the nominees to the Penney board was Steven Roth, chairman of Vornado
Realty Trust, which owns roughly 10 percent of the department store chain.
Both are expected to win election to Penney’s board in February.
Ullman, chairman and chief executive officer of J.C. Penney, said in a statement, "We
welcome Bill and Steve to the board. They share our passion for operational
excellence and are committed to enhancing value for all of the company’s
shareholders. We look forward to benefitting from their expertise."
their combined share in Penney was made public, speculation has been that Messrs.
Ackman and Roth would make some sort of real estate play, perhaps spinning
of the chain’s holdings as a separate real estate investment trust
(REIT). Mr. Ackman tried unsuccessfully to get Target to pursue this strategy
in 2008 and 2009.
Leah Hartman, senior vice president at CRT Capital Group,
told The Dallas
Morning News that she expects the new board members to help Penney to "find
ways to unlock additional value" from its real estate.
Mr. Ullman doesn’t
think he and the new board members will be overly transfixed on the company’s
real estate. As a Wall Street Journal report points
out, the chain created a REIT back in 1999 for tax purposes. Today, the REIT
owns about 38 perdent of the company’s real estate assets.
Penney’s CEO told the Journal,
that he did not anticipate spending a lot of time with the new members discussing
The company also announced yesterday that it was closing several
stores as well as "winding down" its catalog business.
"The actions we are announcing today are significant steps in an ongoing
process to ensure we are best managing costs and allocating our resources effectively
to the strategies that will allow us to improve margins and drive profitable
sales over the long term," said Mr. Ullman in a statement. "We see
significant opportunities ahead in our core department store and online businesses
as part of our Long Range Plan and we are well prepared to capitalize on them
in 2011 and the years to come."
- JCPenney Agrees to Name William Ackman and Steven Roth to Board of Directors – J.
C. Penney Company, Inc.
- JCPenney Takes Strategic Actions to Maximize Long-Term Growth and Profitability
– J. C. Penney Company, Inc.
- Plano-based J.C. Penney closes stores and invites activist shareholders onto
board – The Dallas Morning News
- Penney to Give Activists a Say on Board – The Wall Street Journal
Discussion Question: What do you think the addition of William Ackman and Steven Roth to the J.C. Penney board of directors will mean for the company? What advice would you give the board for Penneys at this time?