Ackman Said Private Equity Approached Him About a J. C. Penney (JCP) Takeover

June 12, 2012 4:35 PM EDT
In a letter to clients today, Bill Ackman's of hedge fund Pershing Square Capital made some extremely bullish comments on portfolio stock J. C. Penney Company, Inc. (NYSE: JCP). Among other things, he noted he was approached about a private equity takeover bid of the company at a large premium shortly after his firm first accumulated its stake.

From the note:
"When we first announced our stake in JCP, the stock price increased to the low $30s per share.Shortly after announcing our stake, we were approached by one of the most well-respected private equity funds in the world who expressed an interest in acquiring the company at a substantial premium. While we welcomed this fund as an owner of the stock, we had no interest in selling the company for a quick premium because we believe in the long-term value creation opportunity.

Ackman said, while he expects a continued high degree of volatility in the stock during its transformation, long term investors "will benefit greatly." He expects the most challenging year of the turnaround to be completed by the beginning of the company's next fiscal year in February.

While the company stated it will take about four years to complete the transformation, Ackam expects the stock to reflect progress over the next 12 months.

"We believe JCP stock is extremely cheap at current prices and that it offers one of the best potential opportunities we have seen for long-term profit when compared with the risk of a permanent decline in value from today’s share price," he concludes.

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