NEW YORK ( TheStreet) -- J.C. Penney ( JCP) announced it is partnering with Martha Stewart Living Omnimedia ( MSO) to create in-store shops.

The department store took a 16.6% stake in the media company, investing $38.5 million, or $3.50 a share. As part of the 10-year deal, J.C. Penney also will have representation on Martha Stewart's board. Martha Stewart Living said it will pay out a one-time special dividend to its shareholders of 25 cents a share.

In February 2013, J.C. Penney will roll out Martha Stewart retail stores inside most of the company's locations. J.C. Penney will market and source the products.

"These Martha Stewart stores are intended to be destinations where consumers can experience an engaging and inspiring environment and buy a variety of affordable, high-quality home and lifestyle merchandise designed and curated by Martha Stewart and her team," the company said in a statement.

The two companies also will launch an e-commerce site in 2013 that will offer Martha Stewart expertise and products.

Martha Stewart shares rose 31.4% to $4.10 in premarket trading Wednesday.

- Reported by Jeanine Poggi in New York.

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