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Ackman Rings Up Gain at Penney…For Now

How did Ron Johnson, widely credited with the success of Apple’s retail operation, end up at J.C. Penny? Hedge fund activist Bill Ackman, J.C. Penney’s largest shareholder, is responsible for recruiting Johnson, according to sources.

Ron JohnsonUPDATED: 5:50pm EST - Score one more for Bill Ackman, the activist hedge fund manager and founder of New York City’s Pershing Square Capital Management.

Shares of J.C. Penney surged more than 18 percent after the retailer announced it has hired Ron Johnson, widely credited with the success of Apple’s retail operation.

Ackman is Penney’s largest shareholder and Penney is among Pershing Square’s three largest holdings, in addition to General Growth Properties and Fortune Brands. He is also a member of Penney’s Board of Directors.

According to sources, Ackman is responsible for recruiting Johnson to the one-gilded retailer.

You may recall that back in early October, Ackman scooped up 16.5 percent of the company’s shares and Vornado Realty Trust, a Real Estate Investment Trust, bought 9.9 percent of the stock.

One week later, Penney adopted a poison pill —  designed to expire in one year — which was obviously intended to blunt a quick hostile takeover.

In January, however, Penney named Ackman and Steven Roth, Chairman of Vornado, to the Board. As part of the deal they were able to name one additional board member.

So Ackman and his minion initially pitched Johnson the idea of simply joining the board, with the possibility of sometime down the road becoming CEO.

When Ackman told the board, he learned they had earlier tried to recruit Johnson to the board, but unsuccessfully.

The Board liked the idea of Johnson becoming CEO and Penney CEO and chairman Myron Ullman decided to think about some sort of succession plan.

The upshot: Ullman decided to step down as CEO after more than six years in that role and become executive chairman.

Johnson, of course, has been Apple’s key leader in its retail strategy. He came up with the idea of the Apple store and the Genius Bar. And, if you’ve ever been to one you always had to be amazed, by the huge crowds in an otherwise empty mall.

The big question, of course, is whether Johnson can perform the same magic at Penney. Of course, creating the same buzz at a has-been retailer like Penney is a different challenge.

It is not a small stand-alone store, but rather a hulking department store that has been trying to find its identity for several decades.

However, those familiar with the situation stress not to look at Penney in a conventional manner, but rather as just one big box that you can put anything into and present any way you can. It is a clean slate for merchandising and marketing when Johnson formally takes over in November.

For Johnson, this is a chance to come full circle in the retail industry.

Before joining Apple, Johnson held a number of positions at Target. He is credited with playing a key role in developing new initiatives for branding, marketing and merchandising. He led the team responsible for launching the Michael Graves exclusive line of products, as well as the addition of other key brands to the store’s selection.

Not coincidentally, Ackman famously has an ill-fated investment in Target that he recently closed out.

After receiving his M.B.A. from Harvard, Johnson, who has a Bachelor of Arts in Economics from Stanford University, turned down a job offer from Goldman Sachs to work at old-line retailer Mervyn’s, working on a loading dock. At the time Mervyn’s was part of Target.

Now Johnson gets his chance to remake one of Mervyn’s old competitors. Investors certainly think he is a worthy investment, bidding up the value of Penney’s stock by more than $1 billion on Tuesday. Talk about learning your value quickly.

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