Ackman to sell full stake in Penney

Bill Ackman’s plan to reshape J. C. Penney hit another snag: He’s selling.

Ackman’s Pershing Square Capital Management on Monday disclosed it’s preparing to sell its 39.1 million shares of the retailer, ending the hedge fund’s efforts at profitable change. The sale was disclosed in an offering notice filed with the Securities and Exchange Commission.

The sale ends a contentious relationship between Ackman and J. C. Penney as the department store retailer attempted to remake itself.

Efforts thus far, including the hiring of former Apple retail head Ron Johnson, have largely failed as consumers were turned off by changes, especially the dramatic reduction of sales. Shares of the stock are down by a third this year, after falling 15 cents, or 1.1%, to $ 13.35 Monday.

If Pershing sold its Penney stock at Monday’s close, the fund would take a loss of $ 490 million, according to data compiled by Bloomberg.

Some are curious about the method Ackman is using to sell the stock. He’s hiring Citigroup to underwrite and sell the shares. Terms of the deal weren’t disclosed. Investors are wondering why Ackman is willing to pay underwriting fees to sell so quickly. “Ackman is saying he better get out now before it ( the stock) is worth less,” says Paul Swinand, analyst at Morningstar. Meanwhile, Citigroup may be making the bet it can get a good price after getting a chance to market the shares, Swinand says.

Ackman resigned from the board on Aug. 13. His departure is a major change in the ownership structure of the company. Pershing Square Capital had been the top single investor in the firm, with nearly 18% of shares outstanding, says S& P Capital IQ. After the sale, the largest owner will be Perry Capital, with its 16 million shares, or 7.3% of shares outstanding.

Retail expert Faith Hope Consolo isn’t surprised at the sale. “In such a volatile market, it’s probably a smart move,” says the chair of Douglas Elliman Real Estate’s retail group.

With Ackman out, that leaves J. C. Penney CEO Mike Ullman with the task of shoring up the company. Penney’s earnings report last week was better than expected, although revenue fell 12% to $ 2.66 billion. That was an improvement on the 23% revenue drop during the same period last year. The company also said that the first weeks of back- to- school shopping were encouraging.