Bill Ackman’s Pershing Square Capital Management LP hired Citigroup Inc. to underwrite the sale of its 39.1 million J.C. Penney Co. shares, after reaching an agreement earlier this month to unload its stake.
The department-store chain today filed a prospectus for the shares that account for about 18 percent of its stock and make Pershing its largest investor. Under the registration agreement filed on Aug. 16, the hedge fund can start selling blocks of the stock four times a year.
The stake sale coincides with Ackman’s agreement earlier this month to quit the board of J.C. Penney after a public clash over its direction and management succession. It also brings to an end a saga in which Ackman’s handpicked CEO Ron Johnson alienated customers with a plan to turn the chain into a collection of boutiques and presided over its worst annual sales in more than two decades.
“Ackman overplayed his hand with Johnson,” Paul Swinand, an analyst for Morningstar Inc. in Chicago, said in an interview. The move to sell his stake will be the end of “a debacle” for J.C. Penney and its shareholders, he said.
J.C. Penney shares dropped 1.7 percent to $13.12 in extended trading, after falling 1.1 percent to $13.35 at the close in New York. The stock has declined 32 percent this year compared with a gain of 16 percent for the Standard & Poor’s 500 Index.
If Pershing sold its stake in the Plano, Texas-based retailer at today’s closing price, the fund would take a loss of $490 million, according to data compiled by Bloomberg. Ackman declined to comment in an e-mail.
Pershing became J.C. Penney’s largest shareholder in October 2010. Ackman then joined the board in February 2011 and began pushing for changes, assuming the activist investor role he also took at many companies, including Target Corp. Four months later, J.C. Penney chose Johnson to replace Mike Ullman as CEO, hiring him away from heading Apple Inc.’s successful stores.
After sales fell 25 percent last year, leading to a net loss of $985 million, Johnson was ousted in April and replaced by Ullman as interim CEO.