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MARK ALBRIGHTRalph Whitworth, who likes to shake things up, buys a 1 percent share of the company that owns Largo's Eckerd Corp.
A San Diego investor with a penchant for rattling sabers at underperforming corporate management has taken a 1 percent share in J.C. Penney Co.
Ralph Whitworth declined to comment on why his Relational Investors LLC spent $54.5-million taking a position in the department store chain a few months ago. But the news, disclosed in a recent SEC filing, has raised investor speculation that the company might face heightened pressure to fix or sell its struggling Eckerd Corp. drugstore unit that's based in Largo.
A one-time employee of 1980s corporate raider T. Boone Pickens, Whitworth became a player in the shareholder activist movement that Pickens organized and backed in the 1990s. After that he used the money management fund he runs with another Pickens lieutenant, David Batchelder, to orchestrate proxy battles, wage publicity campaigns and win seats on boards of companies they think need shaking up.
Instead of hostile takeovers and "greenmail" payments, they seek to profit by taking small stakes in companies and pressuring directors and management to deal decisively with underperforming businesses. Frequently Whitworth's ire is directed at entrenched management and lax governance at the board level.
One of the big investors in Relational Investors LLC is Calpers, the giant California state employee pension fund that has been a force in the shareholder rights movement.
Some of Whitworth's past campaigns included pressing for the ouster of Dennis Kozlowski as chairman of Tyco International LLC and Jill Barard as chief executive of Mattel Inc. He stepped in as acting chairman of Waste Management Inc. at the height of an accounting scandal to hire new management. He also pushed the board of Tektronix Inc., an Oregon maker of test equipment, to sell its computer printer and digital broadcast business in 1999. After the divestitures Tektronix shares quadrupled.
"Whitworth was a catalyst behind changes in the board, at the management level, and also in the company's operating strategy," said Paul Knight, an analyst with Thomas Weisel Partners LLC who followed Tektronix.
Whitworth has a profile in the media world, too. His wife, Wendy Walker, is executive producer of CNN's Larry King Live. After Whitworth wrote a $1-million check to one of Paul McCartney's favorite charities, the former Beatle sang at Walker's birthday party.
Penney officials had no comment on Whitworth taking a stake in their company. But some shareholders think Eckerd's troubles have become a distraction from the rebuilding of the JCPenney department store business, which is now in the third year of a five-year turnaround plan.
Penney chairman and chief executive Allen Questrom has made no secret that in the long run he sees Penney separating from Eckerd. He will weigh at the end this year whether to try selling or spinning off the nation's fourth largest drugstore chain. But he had been counting on the drugstore chain's own recovery to be more evident by now.
"Why not cash it in now and get people's eyes on the department store where there has been a tremendous turnaround?" asked Robert Olstein, president of Olstein Financial Alert Fund, which owns 1.3-million Penney shares.
- Times researcher Caryn Baird contributed to this report, which used information from Bloomberg News and the Los Angeles Times. Mark Albright can be reached at albright@sptimes.com or 727 893-8252.