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Penney board enters fray, defends against Ackman-proposed CEO ouster


New York City -- Scathing letters continued flying back and forth on Friday, between activist investor Bill Ackman and the J.C. Penney board of directors — each attacking the other’s handling of the CEO search process and timing.

Then, CNBC reported that Perry Capital, a 7% Penney stakeholder, has weighed in as well, and will file a 13-D urging the board to immediately remove Mike Ullman as CEO, and replace his leadership with Allen Questrom as chairman and Footlocker’s Ken Hicks as CEO.

Perry’s position follows Thursday’s written statement by Pershing Capital’s Ackman, asking for Ullman’s ouster and suggesting that former Penney CEO Questrom would return as chair if he “likes the new CEO choice.”

The board isn’t taking the pressure lying down. After a second Ackman letter in two days, Thomas Engibous, Penney’s chairman, issued the following response: "The board is focused on the important work of stabilizing and rejuvenating the business. It 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. The board also continues to actively oversee management as it conducts the important work underway to rebuild the company. Mr. Ackman's statements are misleading, inaccurate and counterproductive."

Wall Street has characterized the back-and-forth between board and stakeholders as a distraction from a much-needed turnaround. This is “just what J.C. Penney does not need,” said one analyst. Others have said that Ullman — reappointed to the chief post in April — simply hasn’t been given enough time to effect meaningful change. However, Citigroup’s Deborah Weinswig wrote that the company needs a “dream team,” and that Questrom and Hicks appear to be just that.

In follow-up to his Thursday letter, Ackman released a second letter on Friday morning, saying that he had “lost confidence” in chairman Engibous, and recommending a boardroom coup that would remove Engibous in addition to Ullman, and put in Questrom.

“Mike was hired by this board as an interim CEO,” wrote Ackman. “He has not acted like one. “We are now flying blind,” he wrote.

Ackman, whose Pershing Square Capital Management owns almost 18% of J.C. Penney’s stock, has reportedly threatened to sell his stake if the board doesn’t take his side in the feud.

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