J.C. Penney (JCP) Wards Off Buyers With Poison Pill Extension

NEW YORK (TheStreet) -- Struggling retailer J.C. Penney (JCP) has amended and extended its poison pill in an effort to discourage potential buyers from taking hold of the company at will.

On Tuesday, the company announced its board had approved an extension to the expiration date of its existing shareholder rights plan to Jan. 26, 2017. The plan was initially set to expire as of August this year.

Board members also voted to lower the beneficial ownership threshold to 4.9% from 10%, making it more difficult for parties interested in a hostile takeover to get a foothold in the business.

"If any person or group acquires 4.9% or more of the outstanding shares of common stock of the company without the approval of the Board of Directors, there would be a triggering event causing significant dilution in the ownership interest of such person or group," the company explained in a statement.

The move also helps protect the company's net operating loss carryforwards (NOLs), which can be used to offset future taxable income and reduce federal income tax liability. The company currently has more than $2 billion in NOLs. If an "ownership change" occurred under the Internal Revenue Code, the company's ability to use its NOLs would be significantly hampered.

TheStreet Ratings team rates PENNEY (J C) CO as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate PENNEY (J C) CO (JCP) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, disappointing return on equity and poor profit margins."

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