Ackman resigns from J.C. Penney Co.'s board

Associated Press

plano, texas

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 provides some short-term relief from a distraction for Penney while it tries to fix its ailing business and as the crucial back-to-school selling season heats up.

But investors pushed the company’s stock price lower Tuesday as they worry about Penney’s long-term struggle to turn its business around.

The share decline also reflected worries that Ackman might sell shares. Ackman’s Pershing Square Capital Management is Penney’s biggest stock-holder with a 17.7 percent stake. CNBC quoted Ackman as saying he had no immediate plans to sell.

“[Penney] got the thorn out of their inside, but they’re both real losers here,” said Charles Elson, head of the John L. Weinberg Center for Corporate Governance at the University of Delaware. It’s bad news for Penney because if Ackman sells his stock, it will hurt the stock price. If he doesn’t, he still will exert a big influence on the company, albeit from the outside.

As for Ackman, the activist investor no longer has an inside view into the company. And if he sells near current prices, he will lose a lot of money.

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, a Canfield native.

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.”

Penney’s board also reiterated its support for Ullman, who returned to that job in April. Ullman previously had served as Penney CEO from 2004 to 2011.