JCPenney’s boardroom brawl is over, and Bill Ackman has staggered out the door.
The activist investor has resigned from the flailing department-store chain’s board of directors after picking an unusually public fight last week as he called for the quick ouster of CEO Mike Ullman.
Penney said this morning that chairman Thomas Engibous and Ullman — who was called in April to replace former CEO Ron Johnson, after being unseated as CEO to make way for Johnson in 2011 — have the “overwhelming” support of the remaining board members.
Penney said it has appointed Ronald Tysoe, a former exec at Macy’s predecessor Federated Department Stores, to fill Ackman’s seat and that it will announce an additional director in the future.
Yesterday, news that Ackman was giving up his quest to oust Ullman was first reported on nypost.com.
Confirming The Post’s report, Ackman said today he has no plans to sell his Penney shares, though sources said he had threatened to do so in a testy board meeting last month as he demanded the exit of Ullman.
In a statement, Ackman said stepping down is the most constructive way forward for the company.
Penney shares dropped 3 percent on the news, recently trading at $12.77.
Indeed, Ackman’s decision to leave the board came as a surprise to some insiders. The New York hedge-fund billionaire appears to have gone back-and-forth on the idea after floating it to the board Sunday and ultimately agreeing to do so late yesterday, sources said.
“It’s not an ideal situation, and [Ackman] saw reasons to stick it out,” a source said. “If things go badly now, he’ll be blamed for leaving [Penney] for dead. If they go well, people will say, ‘See? They just had to get rid of Ackman.'”
The source reckoned that by leaving the board but remaining its biggest shareholder with 18-percent stake in the company, Ackman has found “a middle way.”
Crucially, in two testy letters to the board that Ackman made public last week, the hedge-fund billionaire declared that the board had become dysfunctional as it cut him off from the retailer’s financial information. He raised alarms about fast-dwindling cash and said a pair of recent internal business forecasts were slashed by Ullman.
In an Aug. 2 letter to the board that wasn’t made public, sources said Ackman had likewise cited Penney’s recent spat with commercial lender CIT, which tightened credit approvals for inventory deliveries to Penney stores.
A source said CIT’s move, first reported by The Post, was a “canary in a coal mine” — a worrisome sign that was being ignored by the board, according to the lengthy letter.
Ackman’s isolation, according to a source, appeared to be a thorny issue without an easy solution as his fellow directors dug in against him, spurring Ackman’s decision to step down.
“Things got so nasty, he apparently decided he didn’t have that much to lose” by leaving the board, one insider speculated.
Ackman now may resume his more traditional role of an activist investor, prodding the board from outside. He is resigned to let Ullman guide Penney through what promises to be a bumpy back-to-school and holiday season.
Next year, however, insiders say a proxy battle might ensue if the board doesn’t make good on its pledge to find a replacement for Ullman. The retailer recently hired Heidrick & Struggles to conduct the search.
Ackman had lately lobbied to replace Ullman with Foot Locker CEO Ken Hicks, who had served for several years as a top Penney exec until 2009. Likewise, Ackman had pushed to replace Engibous as chairman with Allen Questrom, the legendary merchant who helped Penney out of a fix as its CEO a decade ago.
Questrom has said he would consider becoming chairman under the right conditions.
Last week, New York hedge-fund magnate Richard Perry disclosed a 7.3-percent stake in Penney and threw his weight behind the Hicks-Questrom slate.
On the other side of the ledger, billionaire George Soros, who owns more than 8 percent of the company, is said to support Penney’s current management.