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The circus-like atmosphere that had taken over the boardroom at J.C. Penney Co Inc ended on Tuesday with hedge fund billionaire William Ackman stepping down from the board of the struggling U.S. retailer.
Ackman's decision to leave comes after a failed two-year attempt by his Pershing Square Capital Management hedge fund to remake Penney's into a more upscale retail chain and a week of public fighting with other board members including interim-Chief Executive Officer Myron (Mike) Ullman.
People close to Ackman and the company said the hedge fund manager's decision to leave the board, which Ackman formally agreed to Monday night, was necessary for Penney to focus on its operations and continue the search for a new CEO.
The move to bring some level of peace and decorum to the Penney boardroom was needed to remove a major distraction as the struggling retailer prepares for the holiday season.
"Bill Ackman has the done the right thing by stepping down from the board, under duress no doubt, and now Mike Ullman has pressure to perform," said David Berman, whose Durban Capital hedge fund specializes in retail stocks.
Last week, Ackman, whose Pershing Square Management Capital Management has a nearly 18 percent stake in Penney, took the unusual step of leaking two letters he wrote to the board to push for a new CEO and a new chairman.
One person familiar with the situation used the word "circus" to describe the events of the past few weeks.
His departure was voluntary, a source familiar with the matter said.
Ackman pushed for a quicker search for a successor for Ullman, who left in 2011. He was replaced by Ron Johnson, an Apple Inc executive handpicked by Ackman to make Penney into a trendier retailer.
The high-risk strategy, which included eliminating discounts, failed, leading to a 25 percent sales drop in 2012. Johnson was ousted in April and replaced by Ullman, who returned to stabilize the retailer.
The question now becomes what Ackman does with the large stake in Penney now that he is no longer taking such a highly visible role in the company's direction.
For his Pershing Square Capital Management, the Penney episode is a misstep reminiscent of his failed bid to push for change at Target several years ago.
Meanwhile, Penney announced a new board member with a retail background, something people close to Ackman said the manager had been seeking.
Ronald Tysoe, a retail industry veteran who spent 16 years as a vice chairman at Macy's Inc predecessor Federated Department Stores, joined the board, filling a vacancy created last year when Burl Osborne died. Penney is also looking for an 11th director.
"Ackman was disruptive. He caused so much uncertainty in the company. Tysoe is well regarded in the retail industry and will bring a calm, measured company. The second-quarter results won't be good, but that's not Ullman's doing, it's Johnson's," said a veteran retail analyst.
Ackman said last week that he pushed for having someone replace Ullman within 30 to 45 days, because the company's internal second-quarter results projections were getting progressively worse.
Penney had been speaking with Tysoe for several weeks and been planning to announce the nomination later this week, a source said, noting Ackman had had little to do with it.
Ackman started buying Penney shares nearly three years ago to the day, paying an average of $21.06 for 39 million shares. If he were to sell them at current prices, he'd lose $323.5 million, or a 40 percent loss.
In midday trade on the New York Stock Exchange, Penney's shares were down 2.3 percent to $12.89,
The search for Ullman's eventual successor will continue even with Ackman's departure, a J.C. Penney spokeswoman said.
(Additional reporting by Nadia Damouni, Dhanya Skariachan and Jennifer Ablan in New York; Sakthi Prasad and Siddharth Cavale in Bangalore; Editing by Ted Kerr, Edward Tobin and Leslie Gevirtz)