(Adds analyst, investor reaction)
By Ilaina Jonas and Olivia Oran
March 4 Vornado Realty Trust is selling
nearly half its stake in U.S. retailer J.C. Penney Co Inc
, a source familiar with the matter said on Monday.
The news, which saw Penney shares fall in after-hours trade,
came less than a week after the department store chain reported
its sharpest sales drop since announcing a grand transformation
plan 13 months ago.
Vornado is one of Penney's largest shareholders and its
chairman, Steven Roth, sits on the retailer's board.
Deutsche Bank was offering a block of 10 million
shares in Penney that was being sold by Vornado, the source told
Reuters. Earlier, CNBC said Deutsche Bank was offering the
Penney shares at a price of between $16.40 and $16.60 a share.
That is below the price at which Vornado acquired Penney
"I think the public market will like this even though the
economics are terrible," Michael Knott, analyst with Green
Street Advisors said, adding that the move showed Vornado's
commitment to exit non-core investments.
Vornado investors have been unhappy with the firm's
investment in Penney, which has been struggling to turn around
under Chief Executive Ron Johnson.
"This investment was a big distraction. It's been a huge
loss of shareholder money," said analyst Alexander Goldfarb with
Sandler O'Neill and Partners. "It's been a very poor outcome,
but it's certainly not a surprise."
According to a regulatory filing at the end of the fourth
quarter, Vornado owned about 18.6 million common shares at an
average price of $25.76 per share. The firm also had a right to
buy 4.8 million Penney shares at $29.10 per share.
The second-largest U.S. real estate investment trust after
Simon Property Group Inc, Vornado last week said it
recorded a $224.9 million non-cash charge in connection with its
"J.C. Penney is a newer investment, which is struggling
right now," Roth told investors on the earnings call.
Representatives for Penney and Roth could not be reached for
comment on Monday.
Penney shares were down 1.7 percent at $16.45 in after-hours
trading, while Vornado shares were up 1 percent at $82.19.
(Reporting By Olivia Oran and Ilaina Jonas; Writing by Ben
Berkowitz and Dhanya Skariachan; Editing by Bernard Orr and Tim