Pershing, Vornado To Take Seats on J.C. Penney Board

J.C. Penney plans to give board seats to the hedge fund Pershing Square Capital Management and Vornado Realty Trust, months after the two investors purchased big stakes in the retailer, people with direct knowledge of the matter told DealBook on Sunday.

J.C. Penney
J.C. Penney

William A. Ackman of Pershing and Steven Roth of Vornado are among the individuals expected to be named to J.C. Penney’s board as soon as Monday, these people said.

Pershing disclosed last October that it owns a 16.5 percent stake in J.C. Penney, while Vornado said that it owned a 9.9 percent stake.

Representatives for J.C. Penney , Pershing and Vornado declined to comment or could not be reached for comment on Sunday.

The expected announcement marks another victory for activist investors, which have re-emerged as powerful forces aimed at shaking up companies in an effort to bolster lagging stock prices.

Mr. Ackman has already scored one victory in recent months: Fortune Brands announced in December that it planned to split itself up into its three component businesses, two months after the hedge fund manager announced that he had purchased a big stake in the company.

J.C. Penney also seems inclined to work with the investors, in contrast to companies like Target that vigorously fought Pershing.

The company’s chief executive, Myron E. Ullman III, has already met with Mr. Ackman and Mr. Roth, and people with direct knowledge of the matter have said that discussions between the retailer and the investors have been constructive.

It is unclear what plans Mr. Ackman and Mr. Roth have in mind to improve J.C. Penney’s business.

Shares in the retailer fell below $20 last August, though the stock’s price has improved as the company rolls out new initiatives.

Earlier this month, the company announced a management shake-up, including the replacement of Robert Cavanaugh as chief financial officer with Michael Dastugue. It also reported a 3.7 percent year-over-year increase in holiday sales.

J.C. Penney has hired Barclays Capital, Goldman Sachs and the law firm Skadden, Arps, Slate, Meagher & Flom as advisers in its talks with Pershing and Vornado.

Neither Pershing nor Vornado is expected to be bound by a standstill agreement, which would have capped the size of the stake that either firm could hold in J.C. Penney, these people said.

But they are currently bound by a shareholder rights plan – commonly known as a poison pill – that J.C. Penney’s board adopted in October.

The antitakeover provision is aimed at preventing other investors working separately or as a group from buying more than 10 percent of the company, and likely sets a limit for Pershing and Vornado as well.

Shares in the retailer have fallen more than 4 percent since Pershing and Vornado disclosed their stakes in J.C. Penney, closing on Friday at $30.34.