Open Letter to the JCPenney Board

Summary

Filed as Amendment No. 7 to Pershing Square's Schedule 13D on August 14, 2013, this document is the regulatory wrapper around Ackman's public break with the JCPenney board. It records his resignation from the board the previous day, attributes it to a "disagreement" over the timing and process of CEO succession, and notes the settlement that added two new directors with retail expertise. The filing also discloses the fund's unchanged 17.7% beneficial ownership and an additional 15.9 million notional shares through total return swaps, bringing economic exposure to roughly 25% of the company. Read as a letter, it is the moment an activist who had helped recruit Ron Johnson and rebuild the board lost patience with the institution he had tried to fix from the inside.

Full Text

Complete document as filed, including the EDGAR header preserved verbatim. Paragraphing restored editorially — words unchanged.

SC 13D/A 1 d584499dsc13da.htm SC 13D/A SC 13D/A Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) Under the Securities Exchange Act of 1934 (Amendment No. 7)* J.C. Penney Company, Inc. (Name of Issuer) Common Stock (Title of Class of Securities) 708160106 (CUSIP Number) Roy J. Katzovicz, Esq. Pershing Square Capital Management, L.P. 888 Seventh Avenue, 42nd Floor New York, New York 10019 212-813-3700 With a Copy to: Stephen Fraidin, Esq. Richard M. Brand, Esq. Kirkland & Ellis LLP 601 Lexington Avenue New York, NY 10022 212-446-4800 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) August 12, 2013 (Date of Event Which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box.

¨ Not e : Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“ Act ”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

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Page 2 1 Name of reporting person Pershing Square Capital Management, L.P. 2 Check the appropriate box if a member of a group (a) ¨ (b) x 3 SEC use only 4 Source of funds OO 5 Check box if disclosure of legal proceedings is required pursuant to Items 2(d) or 2(e) ¨ 6 Citizenship or place of organization Delaware Number of shares beneficially owned by each reporting person with 7 Sole voting power 0 8 Shared voting power 39,075,771 9 Sole dispositive power 0 10 Shared dispositive power 39,075,771 11 Aggregate amount beneficially owned by each reporting person 39,075,771 12 Check box if the aggregate amount in Row (11) excludes certain shares x 13 Percent of class represented by amount in Row (11) 17.7% (1) 14 Type of reporting person IA (1) Calculated based on 220,298,991 shares of the Common Stock, 50 cents par value, of J.C. Penney Company, Inc., outstanding as of June 7, 2013, as reported in J.C. Penney Company, Inc.’s quarterly report on Form 10-Q, filed on June 11, 2013, for the quarterly period ended May 4, 2013.

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Page 3 1 Name of reporting person PS Management GP, LLC 2 Check the appropriate box if a member of a group (a) ¨ (b) x 3 SEC use only 4 Source of funds OO 5 Check box if disclosure of legal proceedings is required pursuant to Items 2(d) or 2(e) ¨ 6 Citizenship or place or organization Delaware Number of shares beneficially owned by each reporting person with 7 Sole voting power 0 8 Shared voting power 39,075,771 9 Sole dispositive power 0 10 Shared dispositive power 39,075,771 11 Aggregate amount beneficially owned by each reporting person 39,075,771 12 Check box if the aggregate amount in Row (11) excludes certain shares x 13 Percent of class represented by amount in Row 11 17.7%(2) 14 Type of reporting person OO (2) Calculated based on 220,298,991 shares of the Common Stock, 50 cents par value, of J.C. Penney Company, Inc., outstanding as of June 7, 2013, as reported in J.C. Penney Company, Inc.’s quarterly report on Form 10-Q, filed on June 11, 2013, for the quarterly period ended May 4, 2013.

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Page 4 1 Name of reporting person Pershing Square GP, LLC 2 Check the appropriate box if a member of a group (a) ¨ (b) x 3 SEC use only 4 Source of funds (see instructions) OO 5 Check box if disclosure of legal proceedings is required pursuant to Items 2(d) or 2(e) ¨ 6 Citizenship or place or organization Delaware Number of shares beneficially owned by each reporting person with 7 Sole voting power 0 8 Shared voting power 13,644,593 9 Sole dispositive power 0 10 Shared dispositive power 13,644,593 11 Aggregate amount beneficially owned by each reporting person 13,644,593 12 Check box if the aggregate amount in Row (11) excludes certain shares x 13 Percent of class represented by amount in Row 11 6.2%(3) 14 Type of reporting person IA (3) Calculated based on 220,298,991 shares of the Common Stock, 50 cents par value, of J.C. Penney Company, Inc., outstanding as of June 7, 2013, as reported in J.C. Penney Company, Inc.’s quarterly report on Form 10-Q, filed on June 11, 2013, for the quarterly period ended May 4, 2013.

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Page 5 1 Name of reporting person William A. Ackman 2 Check the appropriate box if a member of a group (see instructions) (a) ¨ (b) x 3 SEC use only 4 Source of funds (see instructions) OO 5 Check box if disclosure of legal proceedings is required pursuant to Items 2(d) or 2(e) ¨ 6 Citizenship or place or organization United States Number of shares beneficially owned by each reporting person with 7 Sole voting power 0 8 Shared voting power 39,075,771 9 Sole dispositive power 0 10 Shared dispositive power 39,075,771 11 Aggregate amount beneficially owned by each person 39,075,771 12 Check box if the aggregate amount in Row (11) excludes certain shares x 13 Percent of class represented by amount in Row (11) 17.7%(4) 14 Type of reporting person (4) Calculated based on 220,298,991 shares of the Common Stock, 50 cents par value, of J.C. Penney Company, Inc., outstanding as of June 7, 2013, as reported in J.C. Penney Company, Inc.’s quarterly report on Form 10-Q, filed on June 11, 2013, for the quarterly period ended May 4, 2013.

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Page 6 TABLE OF CONTENTS

ITEM 1. SECURITY AND ISSUER 7

ITEM 4. PURPOSE OF TRANSACTION 7

ITEM 5. INTEREST IN SECURITIES OF THE ISSUER 7

ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER 8

ITEM 7. MATERIAL TO BE FILED AS AN EXHIBIT 8 SIGNATURES 9 EXHIBIT INDEX 10 EX-99.7 EX-99.8

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Page 7

ITEM 1. SECURITY AND ISSUER This amendment No. 7 to Schedule 13D (this “ 13D Amendment No. 7 ”) amends and supplements the statement on Schedule 13D (the “ Original Schedule 13D ”), filed on October 8, 2010, as amended and supplemented by amendment No. 1 (the “ 13D Amendment No. 1 ”), filed on January 25, 2011, amendment No. 2 (the “ 13D Amendment No. 2 ”), filed on February 10, 2011, amendment No. 3 (the “ 13D Amendment No. 3 ”), filed on February 25, 2011, amendment No. 4 (the “ 13D Amendment No. 4 ”), filed on August 19, 2011, amendment No. 5 (the “ 13D Amendment No. 5 ”), filed on September 23, 2011, and amendment No. 6 (the “ 13D Amendment No. 6 ”), filed on January 3, 2013 (the Original Schedule 13D as amended and supplemented by the 13D Amendment No. 1, the 13D Amendment No. 2, the 13D Amendment No. 3, the 13D Amendment No. 4, the 13D Amendment No. 5, the 13D Amendment No. 6, and this 13D Amendment No.

7, the “ Schedule 13D ”), by Pershing Square Capital Management, L.P., a Delaware limited partnership (“ Pershing Square ”); PS Management GP, LLC, a Delaware limited liability company (“ PS Management ”); Pershing Square GP, LLC, a Delaware limited liability company (“ Pershing Square GP ”); and William A. Ackman, a citizen of the United States of America (together with Pershing Square, PS Management and Pershing Square GP , the “ Reporting Persons ”), relating to the common stock, par value $0.50 per share (the “ Common Stock ”), of J.C. Penney Company, Inc., a Delaware corporation (the “ Issuer ”). The principal executive offices of the Issuer are located at: 6501 Legacy Drive, Plano, Texas 75024-3698. Capitalized terms not defined in this 13D Amendment No. 7 shall have the meaning ascribed to them in the Schedule 13D. Except as set forth herein, the Schedule 13D is unmodified. As of August 14, 2013, as reflected in this Amendment No. 7, the Reporting Persons beneficially owned an aggregate of 39,075,771 shares of Common Stock, representing approximately 17.7% of the outstanding shares of Common Stock of the Issuer.

The Reporting Persons also have additional economic exposure to approximately 15,969,239 notional shares of Common Stock under certain cash-settled total return swaps, bringing their total aggregate economic exposure to 55,045,010 shares of Common Stock, representing approximately 25.0% of the outstanding shares of Common Stock of the Issuer.

ITEM 4. PURPOSE OF TRANSACTION Item 4 of the Schedule 13D is hereby amended and supplemented by adding the following information: Effective on August 12, 2013, William A. Ackman resigned from the Issuer’s board of directors. Mr. Ackman’s resignation was the result of a disagreement with the Issuer’s board related to the timing and process surrounding the board’s CEO succession plan and, as a result of the resignation, Mr. Ackman and the Issuer entered into a settlement which includes, among other things, the appointment of two new directors to the board with substantial retail expertise. The Reporting Persons intend to review their investment in the Issuer on a continuing basis.

Depending on various factors (including, without limitation, the Issuer’s financial position and strategic direction, actions taken by the Issuer’s board, price levels of their securities, other investment opportunities available to the Reporting Persons, concentration of positions in the portfolios managed by the Reporting Persons, market conditions and general economic and industry conditions), the Reporting Persons may take such actions with respect to their investments in the Issuer as they deem appropriate, including, without limitation, reducing some or all of their beneficial or economic holdings, engaging in hedging or similar transactions with respect to the securities relating to the Issuer and/or otherwise changing their intention with respect to any and all matters referred to in Item 4 of Schedule 13D.

ITEM 5. INTEREST IN SECURITIES OF THE ISSUER Items 5 (a) and (b) of the Schedule 13D are hereby amended and supplemented by adding the following information: (a), (b) Based upon the Issuer’s quarterly report on Form 10-Q, filed on June 11, 2013, for the quarterly period ended May 4, 2013, there were 220,298,991 shares of the Common Stock outstanding as of June 7, 2013. Based on the foregoing, the 39,075,771 shares of the Common Stock (the “ Subject Shares ”) beneficially owned by the Reporting Persons represent approximately 17.7% of the shares of the Common Stock issued and outstanding.

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Page 8 Pershing Square, as the investment adviser to the Pershing Square Funds, may be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition of) the Subject Shares. As the general partner of Pershing Square, PS Management may be deemed to have the shared power to vote or to direct the vote of (and the shared power to dispose or direct the disposition of) the Subject Shares. As the general partner of PS and PS II, Pershing Square GP may be deemed to have the shared power to vote or to direct the vote of (and the shared power to dispose or direct the disposition of) the 13,369,366 shares of the Common Stock held for the account of PS and the 275,227 shares of Common Stock held for the account of PS II. By virtue of William A. Ackman’s position as the Chief Executive Officer of Pershing Square and managing member of each of PS Management and Pershing Square GP, William A. Ackman may be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition of) the Subject Shares and, therefore, William A.

Ackman may be deemed to be the beneficial owner of the Subject Shares. As of the date hereof, none of the Reporting Persons own any shares of the Common Stock other than the Subject Shares covered in this Schedule 13D. Item 5(c) of the Schedule 13D is hereby amended and supplemented by adding the following information: (c) Exhibit 99.7, which is incorporated by reference into this Item 5(c) as if restated in full, describes all of the transactions in shares of Common Stock and swaps that were effected in the past sixty (60) days by the Reporting Persons for the benefit of the Pershing Square Funds, which transactions were consummated in connection with a rebalancing of the Pershing Square Funds. Except as set forth in Exhibit 99.7 attached hereto, within the last 60 days, no reportable transactions were effected by any Reporting Person.

ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER Item 6 of the Schedule 13D is hereby amended and supplemented by adding the following information: In connection with William A. Ackman’s resignation from the Issuer’s board of directors, the Reporting Persons entered into a customary Registration Rights Agreement, dated as of August 13, 2013, by and between the Issuer and Pershing Square (the “ Registration Rights Agreement ”), which is attached hereto as Exhibit 99.8 and incorporated herein by reference.

ITEM 7. MATERIAL TO BE FILED AS AN EXHIBIT Exhibit 99.7 Trading Data Exhibit 99.8 Registration Rights Agreement

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SIGNATURES After reasonable inquiry and to the best of the undersigned’s knowledge and belief, each of the undersigned certify that the information set forth in this statement is true, complete and correct. Date: August 14, 2013 PERSHING SQUARE CAPITAL MANAGEMENT, L.P. By: PS Management GP, LLC, its General Partner By: /s/ William A. Ackman William A. Ackman Managing Member PS MANAGEMENT GP, LLC By: /s/ William A. Ackman William A. Ackman Managing Member PERSHING SQUARE GP, LLC By: /s/ William A. Ackman William A. Ackman Managing Member /s/ William A. Ackman William A. Ackman Table of Contents

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EXHIBIT INDEX Exhibit Description Exhibit 99.1 Joint Filing Agreement* Exhibit 99.2 Trading Data* Exhibit 99.3 Letter Agreement* Exhibit 99.4 Stockholders Agreement* Exhibit 99.5 Second Stockholders Agreement* Exhibit 99.6 Trading Data* Exhibit 99.7 Trading Data Exhibit 99.8 Registration Rights Agreement * Previously Filed

Key Themes

• The Right CEO — the succession disagreement at the center of the resignation; the board's process for replacing Ron Johnson was, in Ackman's view, too slow and too opaque
• The Activist Premium — even from inside the boardroom, Pershing Square kept acting as a catalyst, using disclosure and public pressure to accelerate change
• Volatility vs. Permanent Loss of Capital — the 25% economic exposure shows conviction; the resignation shows a willingness to change the governance channel rather than abandon the position

Context & Significance

This is late Act II, the golden era cracking open. In 2010 Ackman had taken a large JCPenney stake, joined the board, helped install Ron Johnson as CEO, and backed the transformative "fair and square" pricing and store redesign. By the summer of 2013 that strategy had collapsed in execution: same-store sales were falling, cash was burning, and the board was moving to replace Johnson at a pace Ackman found lethargic. His resignation is best understood as a strategic withdrawal from a governance position that had become a constraint. Staying on the board meant fiduciary silence; leaving it restored the freedom to act, speak, and trade.

The mindset is not the cold post-mortem of the valley years but the urgency of someone who still believes the underlying asset is salvageable. The filing insists the Reporting Persons "intend to review their investment on a continuing basis" and reserve the right to reduce, hedge, or otherwise change course. That is the language of a large holder keeping his options open, not a defeat. The honest retrospective is that the public break was an early signal of the JCPenney disaster: within months Pershing would exit the position at a substantial loss, and the company would drift toward the long decline that ended in bankruptcy. At the time, however, the letter reads as an attempt to rescue value by breaking a deadlock — activism turned inward against a board the activist had helped build. Read against the earlier Ira Sohn JCPenney presentation, the filing marks the end of the optimistic restructuring chapter and the beginning of the public conflict that would force Ackman out.