Ackman quits Penney board; not selling shares
After days of turmoil, activist investor Bill Ackman resigned from J.C. Penney's board, saying Tuesday that a deal for his exit is "the most constructive way forward" to save the troubled retailer. He indicated to CNBC he doesn't plan to sell his shares in the company.
As part of the deal, the board "reaffirmed its overwhelming support" for CEO Myron Ullman and Chairman Thomas Engibous, who had been targeted by Ackman.
Ackman told CNBC his resignation was part of a deal in which Ronald Tysoe has been elected to the board. Tysoe spent 16 years as vice chairman of Federated Department Stores, now named Macy's. Another "highly qualified" new director will be added later, the company said.
"I elevated a bunch of issues that are critically important by making them public," Ackman told CNBC in a telephone interview. "We came to an agreement on Ron Tysoe."
"The board will function more effectively without the noise," Ackman said, adding that he is "confident it will focus the board on all the right things."
Ackman's Pershing Square hedge fund purchased JCP at about $25 per share and holds an 18 percent stake, according to the most recent filing.
"If I wanted to sell I could have sold all along during the quarterly window," Ackman told CNBC.
Jeff Sonnenfeld, professor at the Yale School of Management, called the move "great news" because it comes at a crucial time for Penney.
"Here we are, just seconds away from the back-to-school crush. It's a very sensitive time for a retailer," Sonnenfeld told CNBC's "Squawk Box" shortly after the announcement. "He needed to leave. They kind of destroyed shareholder value and violated the breach of trust on a board. ... I don't think any board would want this guy [Ackman]."
In the company's news release, Ackman is quoted as saying: "During my time on the J. C. Penney Board of Directors, I have always advocated for what I believe to be in the best interests of the Company—its stockholders, employees and others. At this time, I believe that the addition of two new directors and my stepping down from the Board is the most constructive way forward for J.C. Penney and all other parties involved."
After the announcement, shares of J.C. Penney initially surged 4 percent, but they later turned lower. (For the latest stock price, click here.)
The public battle escalated Friday, with Ackman demanding the ouster of Engibous and Ullman.
"I have lost confidence in our chairman's ability to oversee this board," Ackman said in a letter last week.
Also Friday, Starbucks CEO Howard Schultz joined the fray by urging the billionaire's removal from the board.
(Read more: Howard Schultz slams Ackman over JC Penney fight)
On Monday it seemed Ackman might be facing a new foe in his campaign: George Soros.
The chairman of Soros Fund Management, which holds a 7.9 percent stake in the embattled retailer, reportedly supported Engibous and Ullman against Ackman's public efforts to replace them, according to Bloomberg.
The company will "probably never be what it was," Dana Telsey, CEO of the Telsey Group, told "Squawk Box." Given the customer traffic over the past few quarters, she said, "getting back to flat would be a victory." At this level, Penney is a "risky" name, but could potentially be a buy, she added.
"The company needs stabilization. The key is getting through this back-to-school and Christmas season in order to reinvigorate traffic," she said. "Board Room fights don't need to be played out on Main Street."
—By CNBC.com's Marty Steinberg and Paul Toscano, with reporting from CNBC's Andrew Ross Sorkin. Reuters contributed to this report.