Ackman's public debate over J.C. Penney escalates

Fri Aug 9, 2013 7:24pm EDT
 
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By Martinne Geller

(Reuters) - The public battle between J.C. Penney Co (JCP.N: Quote) and leading shareholder Bill Ackman escalated Friday with the hedge fund manager demanding the ouster of the retailer's chairman as well as the interim CEO, while Starbucks (SBUX.O: Quote) CEO Howard Schultz joined the fray urging the billionaire's removal from the board.

Ackman sent an open letter to the Penney board -- his second letter in as many days -- publicly criticizing the board and seeking the ouster of Chairman Thomas Engibous. A day earlier he had demanded the replacement of interim chief executive Myron Ullman.

"I have lost confidence in our chairman's ability to oversee this board," Ackman said in an open three-page letter.

"Penney is at a very critical stage in its history and its very existence is at risk. In recent weeks, our board has ceased to function effectively."

Late Friday, hedge fund Perry Capital, which owns 7.3 percent of Penney, expressed support for Ackman's strategy and urged the company to immediately seek to replace Ullman with Allen Questrom and Engibous with Ken Hicks. Together Ackman and Richard Perry own almost a quarter of the $3 billion-company.

Perry, head of Perry Capital, said Friday that while his firm appreciates Ullman's willingness to take on the interim CEO role at a "critical juncture," it is necessary that J.C. Penney change its board and management structure in a way that provides the company with "the greatest chance for success."

J.C. Penney fired back, calling Ackman's statements "misleading, inaccurate and counterproductive."

"The board ... is following proper governance procedures, and members of the board have been fully informed and are making decisions as a group. This includes the CEO search process, which is being conducted at an appropriate pace," said Engibous, in a statement.   Continued...

 
The entrance of a J.C. Penney store is pictured in Arcadia, California March 1, 2013. REUTERS/Mario Anzuoni