JC Penney buying stake in Martha Stewart Living

  

PLANO, TX -- J.C. Penney Co. is buying a minority stake in Martha Stewart Living Omnimedia Inc. for $38.5 million, the latest move by the department store to revive its brand.

Penney is acquiring a 16.6 percent stake in the media and merchandising company. The Plano, Texas, company will create mini-Martha Stewart shops within its department stores and a joint website.

Teaming with Martha Stewart is just another piece of the puzzle in Penney's attempt to draw shoppers to its more than 1,100 stores.

In an effort to boost flagging sales, the department store chain brought on former Apple Inc. executive Ron Johnson as its CEO. He joined the company's board in August and took over merchandising and marketing responsibilities on Nov.1. Johnson will assume the remaining CEO functions on Feb. 1.

He told analysts last month that the department store was rethinking everything it's doing, from pricing to products.

Penney also hired Target Corp.'s top marketing executive, Michael Francis, as its new president in October. And the chain announced last month that it hired two of Johnson's former Apple colleagues, Daniel Walker and Michael Kramer, to serve as chief talent officer and chief operating officer.

In its latest move, Penney is buying 11 million Martha Stewart Living shares at $3.50 per share, and getting representation on the New York company's board. The companies did not disclose how many board seats were involved.

"We intend for Martha Stewart stores to be a key centerpiece of our new strategy to transform J.C. Penney into America's favorite store," CEO Johnson said in a statement.

As part of a 10-year deal, the companies will create Martha Stewart retail stores within most J.C. Penney locations starting in February 2013. The stores will carry home goods and other items that will be chosen by Martha Stewart and her team, and marketed by Penney.

The joint website, which will have products from the Martha Stewart stores inside J.C. Penney and other items designed or chosen by lifestyles guru Stewart, is also expected to launch in 2013.

"To partner with J. C. Penney, Ron and his extraordinary team is a big and important step in realizing my dream of putting our Martha Stewart designed products within easy reach of an even broader consumer audience," Stewart, who is the founder and a board member of the company that bears her name, said in a statement.

Martha Stewart Living is expected to receive more than $200 million from the 10-year deal. Its rose 23 percent to $3.85 in premarket trading. Penney shares were unchanged before the market open. They closed at $33.30 Tuesday.

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