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Ron Burkle launches proxy fight against Barnes & Noble

The Los Angeles billionaire pushes for a shareholder vote after a judge dismisses his lawsuit seeking to expand his stock holdings in the bookseller.

August 13, 2010|By Andrea Chang, Los Angeles Times

Barnes & Noble Inc.'s heated battle with Los Angeles billionaire Ron Burkle continued Thursday as a judge dismissed his lawsuit against the bookseller that sought to expand his stock holdings.

The decision by a Delaware judge came hours after the bookstore giant announced that it had not reached a settlement with Burkle's Yucaipa Cos. to avert a costly proxy fight after news reports said the companies were close to a deal.

"Yucaipa was battling to get control, and Barnes has essentially successfully defended against that as of this hour, or so it seems," said David Schick, an analyst at Stifel, Nicolaus & Co. "This is a tennis match and this is one game in the match.... There's no reason to say that this chapter is the last chapter."

Indeed, soon after the ruling, Yucaipa launched a proxy fight seeking a shareholder vote to replace three Barnes & Noble board members, including Chairman Leonard Riggio, and to amend the company's poison-pill plan.

Thursday's developments come at a time when Barnes & Noble is considering selling itself and are expected to further strain an already tense situation between the two parties that began late last year when Burkle started aggressively buying the company's shares and criticizing its management.

Burkle, who owns roughly 19% of the bookseller's stock, was suing Barnes & Noble to increase his stake without triggering the poison-pill plan. The plan is intended to prevent hostile takeovers by barring investors from hoarding more than 20% of its shares without approval by the board.

In the decision, Delaware Chancery Judge Leo. E. Strine Jr. said Barnes & Noble had cause to believe that Burkle was planning a takeover of the company without paying other shareholders a reasonable premium.

"Yucaipa frames its argument that it poses no serious threat in a very convenient and self-serving way," the 87-page ruling said. "The defendants have shown that their adoption and use of the Rights Plan was a good-faith, reasonable response to a threat to Barnes & Noble and its stockholders."

Shares of Barnes & Noble rose 58 cents, or 4%, to $15.06.

Barnes & Noble said in a statement it was pleased with the court's decision "to protect shareholders against Yucaipa's efforts."

In its proxy filing with the Securities and Exchange Commission, Yucaipa nominated three people, including Burkle, for Barnes & Noble's board and said: "Now more than ever, we need new, independent directors."

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