Should JCP go private?

From a recent RetailWire discussion: There are plenty of ideas being kicked around to “save” JCPenney from what seems like an inevitable downward spiral. Among these: Going private, or spinning off some of the company’s real estate assets. Here’s my opinion:

Going private might have been a smart idea for JCP at the beginning of 2012, to take the spotlight away from the company’s quarterly results while it began its “reinvention” process. It might also have preserved some of Ron Johnson’s credibility, which has been eroded by his upbeat pronouncements to “the street” in the face of terrible numbers.

I’m no financial expert, but at this point going private would be a question mark. Can the company afford to be saddled with more debt through an LBO, given its weakened operating model? (Low sales, high expenses, poor margins.) And would investors who bought into the vision (at $20, $30 or higher per share) support going private at such a depressed share price? (Again, I’m sure that other panelists with more

expertise will weigh in on this idea.) As to a REIT spinoff, this has echoes of what Bill Ackman tried to engineer with Target several years ago. If the top 300 doors are the only ones worth salvaging, is the company worth saving — or are the high-volume locations the key attraction in an acquisition?


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