Plano, TX—In an effort to stem any possible hostile takeover attempt should its major stakeholder, William Ackman of Pershing Square Capital decide to sell his shares, JCPenney’s board of directors this week approved a poison pill plan.
The shareholder rights plan, sometimes called a “poison pill,” seeks to prevent new investors from gaining control of the company, after Ackman, who hedge fund controls about 18% of the company, sells his stake.
The plan, which is effective for a year, “is designed to dilute the value of a stock by flooding the market with additional shares, making it expensive for an investor to acquire a controlling stake.”
While the poison pill would kick in when an investor acquires 10% or more of JCPenney’s outstanding stock, it excludes Ackman’s Pershing Square Capital as well as Vornado Realty Trust, which holds about 3.9% stake in the retailer. But the plan would effect Soros Fund Management which recently expanded its holdings in JCPenney to 9.1%.
Ackman: ‘Retail Not Our Strong Suit’
Ackman left the board last week after a very public spat with other members of the board of directors over the hiring of a new chief executive to replace Myron “Mike” Ullman who returned earlier this year after replacing CEO Ron Johnson, who Ackman had supported.
“We may choose to exit JCPenney after more or less time depending on developments at the company, the stock price, and the availability of other investment opportunities,” Ackman was quoted as saying earlier this week.
In a letter to investors in his Pershing Square Capital, the Wall Street Journal reported that Ackman admitted mistakes, especially in the case of JCPenney
“We are going to make mistakes,” Ackman wrote. “Our mistakes are often going to be much more visible than those of other investment professionals. We have had three failures on the long side: Borders Group, Target, and JCPenney. Clearly, retail has not been our strong suit, and this is duly noted.” Ackman wrote his comments under a section in the letter entitled “Mistakes.”
Ackman, along with Steve Roth of Vornado, were believed to be the biggest supporters of the board hiring Johnson, who had been head of Apple’s retail division.
In its second quarter earnings report released earlier this week, JCPenney said it believed its third quarter would improve thanks to back-to-school shopping. The department store lost $586 million in its second quarter.