Ackman Loses In JCPenney Share Sale
NEW YORK (AP) – It’s official.
JCPenney’s biggest investor and former board member Bill Ackman is through with the retailer, selling his entire 18 percent stake to Citigroup and taking a more than $400 million bath on the deal.
In a regulatory filing Wednesday, Ackman’s disclosed that he sold 39.1 million shares to the bank for $12.60 per share or $492.3 million. That’s nearly half of the average $25 a share that he paid when he first invested in JCPenney in 2010.
JCPenney and Ackman’s hedge fund, Pershing Square Capital Management, said Monday that Ackman planned to sell all of his JCPenney holdings and named Citigroup as the underwriter. Until the latest filing, it wasn’t made public what Citigroup Inc. had paid before re-offering the shares on the market for $12.90 each.
The move comes more than two weeks after Ackman resigned from JCPenney’s board as part of a deal to resolve an unusually public battle between the activist investor and the struggling department store operator.
JCPenney Co. Inc., which is based in Plano, Texas, is trying to recover from a botched transformation plan that was spearheaded by its former CEO Ron Johnson, who was ousted in April after 17 months on the job.
Ackman resigned from the board on Aug. 13 after he went public with statements saying he’d lost confidence in JCPenney’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. Ullman was Johnson’s predecessor but was rehired when Johnson was fired.
Ackman joined JCPenney’s board in February 2011 and had pushed the board to hire Johnson, a mastermind of Apple Inc.’s successful stores. Under Johnson’s leadership, JCPenney got rid of most sales in favor of everyday low prices. He also brought in hip new brands and planned to remake the store as an indoor mini mall of sorts with 100 different in-store shops in an effort to woo trendier, more affluent shoppers. But those efforts alienated JCPenney’s loyal customers.
JCPenney ended up recording nearly $1 billion in losses and a 25 percent drop in revenue in the fiscal year that ended Feb. 2, the first year of the transformation plan. Sales declines and losses have continued into the first and second quarters as Johnson’s legacy continued to cast a shadow on the results. Ullman is now working to stabilize the business by bringing back more frequent sales and restoring basic merchandise that was eliminated by Johnson.
JCPenney shares fell more than 3 percent, or 41 cents, to close at $12.76 on Wednesday. JCPenney’s shares have lost 70 percent of their value since early February 2012 when investor enthusiasm over Johnson’s retail strategy pushed the stock to around $43. That includes a 35 percent drop in value so far this year.
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