J.C. Penney Agrees to Let Ackman Start Selling Stake

Bill Ackman, the largest investor in J.C. Penney with about 18 percent, can start selling shares in the department-store chain in November following his resignation from the board after a dispute with fellow directors.

Pershing Square Capital Management LP, the hedge fund Ackman founded, can register to sell blocks of stock four times beginning 90 days after Aug. 22, according to a filing today. J.C. Penney has limited rights to postpone a sale or request that Pershing Square refrain from disposing of shares for as much as three months.

The agreement enables a sale to be done in “an orderly fashion and over a period of time,” Deborah Weinswig, an analyst for Citigroup Inc. in New York, wrote today in a note to clients. Still, “this could serve as an overhang on the stock as investors wonder if Pershing Square will exit its stake.”

The accord was part of Ackman’s departure from the board on Aug. 12 after a public battle with other directors over the direction of the Plano, Texas-based company, including how quickly to replace interim Chief Executive Officer Mike Ullman.

J.C. Penney fell 3.1 percent to $13.40 at the close in New York. The shares had declined 30 percent this year through yesterday, compared with a gain of 16 percent for the Standard & Poor’s 500 Index.

Pershing became the chain’s largest shareholder in October 2010. Ackman then joined the board in February 2011 and began pushing for changes in assuming the activist investor role he also took at many companies, including Target Corp. Four months later, J.C. Penney chose Ron Johnson to replace Ullman as CEO in hiring him away from heading Apple Inc.’s successful stores.

Johnson’s Tenure

Johnson was ousted amid slumping revenue. Sales fell 25 percent last year, leading to a net loss of $985 million as his bid to overhaul the century-old chain’s stores and merchandise failed to win enough new shoppers while alienating older ones.

The board brought back Ullman on an interim basis in April to stabilize the company. In a few weeks, he shored up the balance sheet by borrowing $3 billion.

That was Ullman’s primary job and the board should have started looking for a permanent CEO then, Ackman said in letters to the board last week. Because it didn’t and Ullman began making more decisions like a long-term CEO, Ackman called for him to be replaced within a month or so.

Chairman Tom Engibous defended Ullman, and Ackman countered by calling for Engibous to be replaced as well. A trio of the chain’s largest investors, including George Soros, took sides in the spat that ended with Ackman resigning.