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Bill Ackman quits J.C. Penney board

Activist investor William Ackman has resigned from the board of J.C. Penney in an apparent deal to calm the unusual public battle between the hedge fund manager and the struggling retailer.

Shares were down nearly 2.9% at $12.79 in late morning trading after an earlier surge in pre-market activity. The shares traded near 12-year lows even before Ackman, the firm's largest investor, sparred with executives in a recent war of words over what strategy the ailing company should pursue.

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Ackman's departure, effective immediately, came days after he called for the replacement of Penney's board chairman Thomas Engibous and said he'd lost confidence in the board.

Ackman, whose investment firm Pershing Square Capital Management owns a nearly 18% stake in the retailer, had also fought over replacing Penney's CEO Mike Ullman.

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"During my time on the J. C. Penney board of directors, 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 formal statement issued by the firm. "At this time, I believe that the addition of two new directors and my stepping down from the board is the most constructive way forward for J. C. Penney and all other parties involved."

Penney's said retail industry executive Ronald Tysoe was named to take Ackman's seat and announced that another person would also be named to the board soon.

Tysoe, who spent 16 years as vice chairman at Federated Department Stores — now Macy's — said he looked forward to "working collaboratively with the rest of the board and management to advance the turnaround currently underway."

Along with thanking Ackman for his service, Engibous said Tysoe's "deep knowledge of the retail industry and his financial expertise will be invaluable to us."

The board also reaffirmed its support for Engibous and Ullman, both of whom, it said "have been working tirelessly to position the Company for future success."

"This important work has included stabilizing the company's operations and financial position , restoring confidence among vendors and taking steps to get customers back into stores," the board said.

Speaking on Bloomberg TV after the announcement, contributor William Cohan said Ackman "lost a courtroom battle — he wanted Mike Ullman out. Mike Ullman is staying." Cohan also predicted that Ackman would not immediately move to sell his Penney's stake but instead let the evolving corporate developments "play out."

Mark Cohen, a veteran retailer and former Sears Canada CEO who's now a professor at Columbia University's School of Business, predicted investors ultimately would welcome Ackman's departure because it marks at least a brief pause in the boardroom turmoil.

He called Ackman's tenure, marked by the recruitment of former Apple executive Ron Johnson, who lacked deep retail experience, a catastrophe. "This enables the company to move forward on a straight line path to some sort of remediation," said Cohen.

Penney's is among the most well-known names in U.S. retailing. It was founded in 1902 by James Cash Penney as a small dry-goods store in Kemmerer, Wyo. Now headquartered in Plano, Tex., the company has approximately 1,100 locations.

But the retailer has been reeling since former CEO Johnson's strategy to dramatically cut the number of Penney's sales backfired and customers defected. Johnson — championed by Ackman — had been instrumental in developing the concept of tech giant Apple's retail stores. Ullman, a former Penney CEO who had held top spots at other retailers, returned in April to help lead a turnaround.

"The damage that Ackman and Johnson caused may never be fully repaired. It takes decades and decades for a retailer to build out its brand equity, and just a few months to lose it," said Cohen. "It's not as if the retail customers who stopped shopping at JC Penney's are now walking around naked," said Cohen. "They quickly found other places to shop."

Penney's is scheduled to report its second-quarter earnings on Aug. 20. Last week, FactSet reported that analysts' average estimate had fallen to a loss per share of $1.05 from a per-share loss of $1 since July.

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