Ron Burkle's Yucaipa Cos. received a boost in its bid to gain seats on Barnes & Noble Inc.'s board after Institutional Shareholder Services said shareholders should vote for its three nominees next week.
ISS sided with Yucaipa, the second-largest shareholder, after two proxy adviser firms recommended last week to vote for Barnes & Noble's nominees, which include the re-appointment of chairman and largest shareholder Leonard Riggio. Investors should also support a Yucaipa amendment to increase the maximum shares allowed under the company's takeover defense, ISS said.
"Dissident nominee Burkle has invested a significant amount of his own wealth buying his stake in the company, and for that reason alone might be perceived as more aligned with the interests of outside shareholders than any of the incumbent directors," ISS said Monday in a report to clients.
Barnes & Noble, the largest U.S. bookstore chain, and Yucaipa have sent press releases and letters to shareholders to make their case since Los Angeles-based Yucaipa filed a proxy on Aug. 12, a few hours after losing a lawsuit to overturn the so- called poison-pill provision. The proxy vote will take place Sept. 28 in New York.
ISS also recommended shareholders vote to increase the amount of shares that can be owned under the pill to 30 percent from 20 percent.
Glass Lewis & Co. and Egan-Jones Ratings Co. backed the company last week and advised voting against amending the pill. Both firms said the position of Aletheia Research and Management Inc. as the company's third-largest shareholder after Riggio and Burkle, with 15 percent, was a reason for siding with the retailer. If the threshold is increased to 30 percent, Aletheia could form a group with Yucaipa and buy Barnes & Noble without paying a premium, the companies said.
Peter Eichler, founder of Santa Monica-based Aletheia, testified in a deposition for the trial over the pill that he met with Burkle twice last year. The Barnes & Noble board was concerned about Aletheia collaborating with Yucaipa before it enacted the pill, court documents show.
Burkle started to buy Barnes & Noble shares in November 2008 and by January 2009 owned 8.3 percent of the company. After Barnes & Noble purchased Barnes & Noble College Booksellers Inc. from Riggio for $514 million in August, Burkle criticized the deal in a letter to Riggio.