By  on September 25, 2011

William Ackman has taken it to the limit.

The billionaire activist investor’s Pershing Square Capital Management said Friday that it had effectively boosted its stake in J.C. Penney Co. Inc.’s stock to 26.1 percent, the maximum allowed under an agreement reached with the retailer last month, through a series of “cash-settled total return swaps.” The swaps added exposure to 16.6 million “notional shares” to the 39.1 million, or 18.3 percent, that Pershing Square already held, driving Ackman’s holdings to just under 55.7 million shares.

The swaps were disclosed in a filing Friday with the Securities and Exchange Commission, which said Ackman’s firm had entered into them on Thursday “for the benefit of certain Pershing Square funds.”

As part of a deal with the retailer last month, Pershing Square agreed to limit its voting rights to 15 percent in the event that it boosted its stake and Penney’s amended a poison pill plan adopted last year to ward off further advances by Ackman after his firm acquired a 16.5 percent stake. Vornado Realty Trust, working in tandem with Pershing, picked up a 9.9 percent holding.

This month, a separate agreement limited Vornado Realty Trust’s “synthetic positions” to a maximum exposure of 15.4 percent. According to an SEC filing by the real estate firm last Monday, it hasn’t increased its stake beyond the 9.9 percent picked up last October.

Although Ackman and Vornado chairman Steven Roth have secured seats on Penney’s board, Ackman hasn’t quite been the firebrand presence that some had expected or that he’d proven to be following previous investments in Target Corp. and General Growth Properties. Still, he was said to be instrumental in the retailer’s selection in June of former Apple executive Ron Johnson as Penney’s next chief executive officer.

Penney’s shares closed ahead 15 cents, or 0.6 percent, at $25.53 following news of Ackman’s expanded stake. That’s 37.7 percent below their 52-week high of $41 but 10.5 percent better than the $23.11 he paid, on average, for his 18.3 percent shareholding. In mid-May, his paper profit stood at $700 million but as of Friday had fallen to $94.5 million.

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