J.C. Penneys announcement that it has given a seat on its Board of Directors to Pershing Squares Bill Ackman and Steven Roth, chairman of the board of Vornado Realty Trust should be greeted with mixed emotions among the retailers shareholders, if history is any indication.
On the one hand, although Ackman has built a great track record investing in consumer-oriented companies, he does not exactly have a great track record when it comes to investing in retailers. The 43 year-old activist investor, for example, has lost most of his stake in Borders Group and lost a huge sum in Target.
On the other hand, Ackman, who is more publicly visible than the typical hedge fund manager, has mostly fared well when he was previously awarded Board positions as a result of an activist campaign at three different companies. One of them, Ceridian Corp., was acquired in 2007 by Thomas H. Lee Partners and Fidelity National Financial for $5.3 billion in cash, a 17 percent premium to the stock's closing price before it announced plans to seek strategic alternatives to maximize shareholder value.
Ackman has also made a killing in General Growth Properties. His average purchase price is below $1 and he initially started buying shares at 34 cents a pop in November 2008. Today the stock trades at around $14.50 apiece.
As part of the companys recapitalization, Pershing Square obtained the right to appoint a director to the GGP board. However, it said in a letter to investors it chose to forgo that right and instead allow the Blackstone Group to appoint John Schreiber in lieu of a Pershing Square representative, asserting he is an extremely experienced retail real estate investor who will best represent the interests of all shareholders.
The third company, alas, is Borders.
In a separate announcement Monday, Penney also said it would close a number of stores, shut down its catalog business and realign its Call Center. As a result of the announcements, the stock surged more than 7 percent at midday.
Pershing Square investors are also not complaining. Last year, the hedge fund rose nearly 22 percent. Ackmans long-term track record is even more impressive. From January 1, 2004 through the third quarter of 2010, Pershing Square L.P. surged nearly 300 percent, net of all fees. During the same period, the S&P was up a measly 17.6 percent.