J.C. Penney cuts poison pill trigger by half, extends to 2017

Tue Jan 28, 2014 10:15am EST

Customers ride the escalator at a J.C. Penney store in New York August 14, 2013. REUTERS/Brendan McDermid

Customers ride the escalator at a J.C. Penney store in New York August 14, 2013.

Credit: Reuters/Brendan McDermid

(Reuters) - J.C. Penney Co Inc (JCP.N) said on Tuesday it extended its poison pill until 2017, and lowered the threshold at which it would dilute the holdings of any shareholder, to prevent a takeover of the department store chain.

The retailer lowered the trigger of its shareholder rights plan, as poison pills are formally known, to 4.9 percent from 10 percent, saying that would "reduce the likelihood" of an ownership change.

That will preserve its ability to use its net operating loss carryforwards to offset future profits and lower its tax bills as allowed under the U.S. tax code, it said.

Penney said it has $2 billion in net operating loss carryforwards.

Penney, struggling to revive sales after a disastrous attempt in 2012 to move upmarket, in August put in place a one-year "poison pill" aimed at thwarting any "abusive takeover" attempts by limiting any single investor's holdings to 10 percent. At the time, several hedge funds had taken large stakes in the retailer.

Penney said that current shareholders owning more than 4.9 percent of shares will only trigger the poison pill if they increase their stake.

State Street Global Advisors, Soros Fund Management and The Vanguard Group are the only investors right now with a stake above the new threshold, according to Thomson Reuters data,

The poison pill, initially set to expire in August 2014, will be valid until January 26, 2017 unless shareholder vote against it at the annual meeting in May.

Wall Street analysts expect Penney to report a $1.86 billion loss for the fiscal year ending this week, according to Thomson Reuters I/B/E/S. It will report earnings in late February.

Penney shares rose 0.3 percent to $6.53 in early trading on Tuesday. In October, they hit $6.24, their lowest since 1981.

(Reporting by Phil Wahba in New York and Siddharth Cavale in Bangalore; Editing by Saumyadeb Chakrabarty and Nick Zieminski)

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