The Wall Street Journal-20080202-The Buzz- Icahn Quietly Acquires Big Stake in J-C- Penney

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The Buzz: Icahn Quietly Acquires Big Stake in J.C. Penney

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Carl Icahn has been shopping in J.C. Penney Co.'s discount aisle.

The billionaire shareholder activist has quietly amassed a big stake in the department-store chain, according to people familiar with the matter. While the exact size of the stake in the 105-year-old retailer is unclear, one person said it is among Mr. Icahn's top five holdings. That could mean it runs into the hundreds of millions of dollars.

There is no guarantee that Mr. Icahn will publicly agitate for change at Penney as he has at companies such as Motorola Inc. and Time Warner Inc. J.C. Penney, Plano, Texas, is run by a well-regarded management team including Chief Executive Myron "Mike" Ullman. Mr. Icahn may instead simply hold the stake passively. The investment will be disclosed in a Securities and Exchange Commission filing by mid- February, one of the people said.

If Mr. Icahn does launch an activist campaign, he is expected to argue, like he did successfully at Time Warner, that Penney should buy back a big chunk of its stock, a move that the company has in the past resisted, preferring instead to invest in its stores. The company could raise cash by boosting its borrowings, which are lower than those of rivals including Macy's Inc., or possibly selling real estate.

Mr. Icahn didn't return calls seeking comment. A person familiar with his thinking has said Mr. Icahn has been critical of Penney's aggressive store expansion, including its move into locations outside shopping malls. Penney had announced plans to open 250 stores from 2007 to 2011, though Mr. Ullman said this past week that the chain may scale back its schedule by 10 or more stores out of the 50 each for 2008 and 2009.

Penney stock, a strong performer between 2003 and 2007, has dropped 43% in the past year as the slowing economy squeezes consumers, even after a recent bounce of roughly 40%. Penney's December same-store sales fell 7.5%.

Mr. Icahn has made no secret of his interest in retailers, declaring last month that recent declines in the industry's shares had made them "very cheap."

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Vanessa O'Connell contributed to this article.