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J.C. Penney adopts poison-pill defense after disappointing earnings

August 22, 2013|By Tiffany Hsu
  • J.C. Penney adopts poison pill defense against possible corporate takeovers.
J.C. Penney adopts poison pill defense against possible corporate takeovers. (Patrick T. Fallon / Bloomberg )

J.C. Penney Co. is girding itself against wannabe corporate raiders, adopting a shareholder rights plan known as a poison pill after reporting yet another quarter of dismal earnings.

The tactic attempts to fend off hostile acquisitions by making it exorbitantly expensive for an individual or entity unapproved by the company’s board to gain a controlling stake. Netflix, Cracker Barrel and other businesses have used the defense in recent years.

In J.C. Penney’s case, the maneuver will be in place for a year to “protect against any potential future use of coercive or abusive takeover techniques,” the struggling retailer said Thursday.

But the Plano, Texas, company, fresh off its disappointing second-quarter earnings report earlier this week, said the defensive move isn’t targeted at any existing threat.

And two of J.C. Penney’s largest shareholders -- Pershing Square Capital Management and Vornado Realty Trust -- are immune to the poison pill, the retailer said. “Certain affiliates” of both groups can increase their already substantial stakes as long as they don’t violate agreements with J.C. Penney.

Pershing Square’s billionaire manager Bill Ackman resigned his J.C. Penney board seat this month after publicly sparring with other members over the company’s turnaround efforts.

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Pershing Square and Vornado’s past share-buying sprees had compelled J.C. Penney to enact a similar poison-pill method in 2010.

This time around, the retailer’s plan would allow existing investors to purchase shares at a deeply discounted price if a buyer who doesn’t pass muster with the board tries to obtain 10% of shares or more.

The move then dilutes the value of the buyer’s holdings.

In midmorning trading in New York, J.C. Penney stock was down 1.1%, or 15 cents, to $13.18 a share. So far this year, the stock is down more than 32%.


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Twitter: @tiffhsulatimes

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