J.C. Penney Takes 16.6% Stake in Martha Stewart Living in Strategic Alliance

Martha Stewart
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"The studio is buzzing. My BlackBerry is buzzing. ... The Internet is buzzing, and it's all because of my daughter Alexis. She's at it again."

UPDATED: MSLO will also pay a special dividend and is expected to get more than $200 million under a commercial arrangement with the retailer.

NEW YORK - Martha Stewart Living Omnimedia on Wednesday unveiled a strategic alliance with J. C. Penney that will see the retailer take a 16.6 percent stake in the media company for $38.5 million, or $3.50 per share.

MSLO is expected to receive in excess of $200 million from J. C. Penney over the initial 10-year contract period of the commercial arrangement that is part of the deal. The retailer will have representation on MSLO's board.

MSLO, which earlier this year said it was exploring strategic options, also said that it would pay a special dividend of 25 cents per share on Dec. 30 to shareholders of record as of Dec. 19. The New York Times reported the firm would get two board seats.

The partners said they would work together to "create a unique and comprehensive retail experience featuring Martha Stewart products, know-how and advice." They will also jointly develop an e-commerce site, which is expected to launch in 2013.

Beginning in Feb. 2013, consumers will be able to visit Martha Stewart retail stores inside the majority of jcpenney department stores, they said. "These Martha Stewart stores are intended to be destinations where consumers can experience an engaging and inspiring environment and buy a variety of affordable, high-quality home and lifestyle merchandise designed and curated by Martha Stewart and her team," the companies said. "Staffed by trained associates, the Martha Stewart stores will also give consumers direct access to the products and educational tips that have made Martha Stewart America's leading lifestyle expert."

MSLO president and COO Lisa Gersh, who will later in the day appear at the UBS Global Media and Communications Conference, said: "The strategic alliance we've announced today with J. C. Penney strengthens our balance sheet, will enhance the reach of our brands and expand our vibrant merchandising and media presence for the benefit of all of our partners. We believe this alliance is an important step in positioning our company for the future."

"The opportunity to work with Martha and create an entirely new shopping experience, both in-store and online, is a once in a lifetime opportunity," said J.C. Penney CEO Ron Johnson who previously worked at Target and at Apple where he pioneered the Apple stores and their Genius Bar concept. "The Martha Stewart brand embodies quality, beauty, inspiration and possibility and we intend for Martha Stewart stores to be a key centerpiece of our new strategy to transform jcpenney into America's Favorite Store."

Said MSLO founder Martha Stewart: "I am greatly impressed with his plans for changing an American classic, J. C. Penney, to make it a very new and different shopping experience."

Email: Georg.Szalai@thr.com

Twitter: @georgszalai