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The Deal: J.C. Penney Pitches Poison Pill

Tickers in this article: JCP

NEW YORK (The Deal) -- Retailer J.C. Penney said Thursday, Aug. 22, it has adopted a shareholder rights plan to ward off takeover efforts, days after reporting its sixth consecutive quarterly loss.

Plano, Texas-based Penney said that the stockholder rights plan will be in effect for one year, and "is designed to protect against any potential future use of coercive or abusive takeover techniques and to help ensure that the company's stockholders are not deprived of the opportunity to realize the full and fair value of their investment."

Penney said the plan was not adopted in response to any effort to gain control the company.

The announcement comes after Penney reported a worse-than-expected net loss of $586 million, including charges. Net sales fell 12% year-over-year, and gross margins fell during the quarter. The company earlier this year appointed Mike Ullman to try to reverse a ruinous turnaround strategy instituted by one time Apple executive Ron Johnson that Penney now blames for its sales woes.

Penney earlier this month said that activist hedge fund manager William Ackman, an early supporter of Johnson, was stepping down from the board. Ackman's Pershing Square Capital Management LP holds about 17.7% of Penney and, as part of the investor's resignation from the board, has agreed to a blackout period precluding him from selling shares.

The retailer said its poison pill includes rights to buy shares that would be exercisable only if a person or group acquires more than 10% of its common stock or commences a tender offer. Pershing Square and Vornado Realty Trust, another large holder, are not covered under the plan so long as they follow agreements in place with the company.

Shares of Penney traded up 1%, or 13 cents, to $13.33. in premarket trading. The company has lost more than half of its value in the last year, and traded above $40 per share as recently as early 2012.

--Written by Lou Whiteman