Pershing Square’s Bill Ackman resigned from the J.C. Penney (JCP) board late Monday, ending a battle between the activist investor and the ailing retailer’s board of directors.
The billionaire hedge fund manager’s abrupt exit comes a week after Ackman released two fierce letters calling Penney’s “very existence” at stake and urging for the resignation of Penney chief executive Mike Ullman and chairman Tom Engibous within 30 to 45 days.
“Mr. Ackman’s resignation was the result of a disagreement with decisions made by the Board of Directors related to the timing and process surrounding the CEO search,” Penney said in a securities filing.
The filing comes a day after the New York Post, citing an anonymous source close to the matter, said the board discussed ways this weekend to force Ackman off the board.
Shares of Penney, which have been battered this year amid disappointing sales and troubles in its c-suite, were up about 2% in early trade on Tuesday following Ackman’s departure. They are still down about 44% year-to-date.
Ackman, Penney’s largest shareholder with an 18% stake, had called for quick changes to the board and c-suite last Thursday and Friday, pointing instead to former Penney CEO Allen Questrom as a potential replacement for Ullman.
On Tuesday, however, Ackman said he believed that the addition of two new directors and his stepping down from the board was the “most constructive way forward for J.C. Penney and all other parties involved."
"I have always advocated for what I believe to be in the best interests of the company - its stockholders, employees and others,” Ackman said in a joint statement with Penney.
Penney’s board reaffirmed its “overwhelming support” for Ullman and Engibous, and said they have “worked tirelessly to position the company for future success.”
In replacement of Ackman, the Plano, Texas-based department store has hired Ronald Tysoe, a long-time retail industry executive who served as vice chairman at Federated Department Stores, now Macy’s (M), for 16 years.
It plans to hire one more “highly qualified” director “in the near future.”
Tysoe, who currently serves on the boards of the Canadian Imperial Bank of Commerce (CM), Scripps Networks Interactive (SNI), Cintas (CTAS), and Taubman Centers (TCO), will be granted an award of restricted stock units having a market value of $120,405 on Aug. 15.
Analysts at Sterne Agee called the board’s announcement a “net positive,” saying that the disagreement “wasn’t well timed” as the struggling department store struggles to undergo a major turnaround.
“The overwhelming board support that Mr. Ullman has received is encouraging and implies to us that he is making progress on the company's turnaround efforts, which is important,” said Sterne Agee analyst Chuck Grom.
The analyst did say that Ackman’s push for a new CEO was “very valid,” but that the investor’s departure has removed a “major roadblock for all potential CEO candidates” that could widen the retailer’s potential talent pool down the road.