J.C. Penney Co. (JCP:US) investors Soros Fund Management LLC and Glenview Capital Management LLC support Chairman Tom Engibous and Chief Executive Officer Mike Ullman in their battle against Bill Ackman, according to people familiar with the situation.
The funds told J.C. Penney they support the current management team after Ackman criticized the executives in letters last week, said the people, who asked not to be identified because the discussions were private. Soros owned about 7.9 percent of J.C. Penney’s stock as of April while Glenview held about 4.3 percent as of March, according to data (JCP:US) compiled by Bloomberg.
Engibous and Ullman are working to turn around the retailer after sales in its most recent year slid 25 percent to the lowest in more than two decades. Ackman, whose Pershing Square Capital Management LP owns about 18 percent of the company’s shares, asked his fellow J.C. Penney directors last week to expedite the CEO search and later to replace Engibous, saying the board isn’t functioning effectively.
Ackman won an ally last week in hedge fund Perry Capital LLC, which disclosed a 7.3 percent stake in J.C. Penney and said it agreed with replacing Ullman and Engibous.
J.C. Penney, based in Plano, Texas, rose 2.3 percent to $13.17 yesterday in New York after earlier climbing as much as 4.4 percent. The shares have slid 33 percent this year, compared with an 18 percent gain for the Standard & Poor’s 500 Index.
Ullman returned to J.C. Penney at age 66 in April, about a year and a half after being replaced by former Apple Inc. executive Ron Johnson, Ackman’s handpicked choice for the retailer’s top job. Since taking over, Ullman has revived price cutting and brought back merchandise to attract core customers alienated by Johnson’s strategy, which centered on ending discounting and remaking the stores into collections of boutiques.
Ullman also shored up J.C. Penney’s cash balance, negotiating a $2.25 billion loan and borrowing $850 million from a revolving credit facility.
The board began a search to find a long-term CEO last month, Engibous said in a letter on Aug. 8. Ackman is pushing to find someone by mid-September since there are only a few candidates, a person familiar with the matter said then.
Ackman told board members in his letter that he persuaded former J.C. Penney CEO Allen Questrom to agree to return as chairman if he approves of the department-store chain’s next CEO. In an interview last week, Questrom, 73, called returning as chairman “a long shot” that hinged on directors forming “a positive board and an aggressive board to help solve the problems” and a new CEO with retail experience being hired.
Ackman plans to back off the push to replace Ullman, the New York Post reported yesterday, citing people it didn’t name. Ackman declined to comment to Bloomberg News in an e-mail. Kristin Hays, a J.C. Penney spokeswoman, also declined to comment.
Soros, which disclosed its stake in J.C. Penney in April, has previously clashed with Ackman. The New York-based firm opposed Ackman’s short on Herbalife Ltd. (HLF:US) by taking a position of less than 5 percent of that company, a person with knowledge of the purchases said on July 31.
Late last year, Soros asked to pull the money it had invested with Ackman’s Pershing Square, a little less than $250 million, because of disappointing returns, according to a person briefed on the matter. The redemptions are staggered over several quarters and will be complete next year.
Glenview, based in New York, disclosed its J.C. Penney stake in November.
J.C. Penney is scheduled to report second-quarter results, the first full quarter under Ullman, on Aug. 20. Sales may decline about 8 percent to $2.78 billion, according to the average of 18 analysts’ estimates (JCP:US) compiled by Bloomberg. The adjusted loss may widen to $1.07 a share, analysts project.
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