Reporting from New York and Los Angeles — Los Angeles billionaire investor Ronald Burkle lost his bid to unseat the chairman of book giant Barnes & Noble Inc. in a shareholder vote that ended Tuesday, delivering a big victory to the company's leadership.
The closely watched vote was considered critical to the future of the company, with Barnes & Noble executives favoring a steady, tried-and-true method of running the world's largest bookseller and Burkle fighting for a major shake-up — although he never made clear what plans he had for the company.
Ever since Burkle began rapidly accumulating the company's shares late last year, he and Barnes & Noble Chairman Leonard Riggio have been engaged in a heated war of words. After Burkle launched a proxy fight in August the two campaigned aggressively to win stockholder support and resorted to bitter attacks, challenging each other's character and financial competence.
The results of the shareholder vote were announced at Barnes & Noble's annual meeting, which featured a boisterous standing-room-only crowd at the Asia Society in New York.
The meeting room was filled with Riggio supporters, who erupted into whoops and applause when the chairman read the results. An official vote count was not released, but Barnes & Noble lawyers said after the meeting that Riggio's slate won by a 5-percentage-point margin.
"For whatever it's worth, this has not been an easy four or five months for all of us," Riggio said as he closed the meeting, "but this is a very great day."
Burkle had been seeking to win a seat on the company's nine-member board of directors along with two allies. With a roughly 19% stake in the company, he also wanted to amend the company's "poison-pill" provision, which bars investors from holding more than 20% of the company's shares without board approval.
If Burkle had won, he would have wielded significant influence over the company's direction and, according to Riggio, could have opened up the path for Burkle to eventually buy the company without paying shareholders a premium.
The vote was expected to be close given the number of shares owned by Burkle's Los Angeles investment firm, Yucaipa Cos., and Aletheia Research & Management Inc., a Santa Monica investment firm that has often followed Burkle's lead.
Riggio and Burkle were expected to face off at the meeting, with Burkle's team requesting the opportunity to make a presentation to shareholders. But the billionaire investor abruptly pulled out and did not attend, although he was said to be in New York.
"They changed their mind five minutes before the meeting started," Barnes & Noble lawyer Scott Barshay said after the meeting. "Quite a turn of events."
Yucaipa released a statement after the meeting claiming a partial victory because Barnes & Noble stockholders not affiliated with Riggio or Yucaipa "voted overwhelmingly for the Yucaipa nominees and poison pill proposal, but due to the insurmountable voting advantage of Leonard Riggio and other insiders the Barnes & Noble slate prevailed."
"While an outright victory would have been the best way to ensure a fair process, we want to thank the independent stockholders who supported us by more than a wide margin," Burkle said in a statement. "It is nearly impossible for any stockholder to do something Leonard Riggio doesn't want to do because of his built-in voting advantage."
Burkle added that although he was pleased that the proxy fight had brought about some changes at Barnes & Noble, there was "a great deal still to do" and that Yucaipa would continue to press for improvements at the company.
Barnes & Noble has made significant changes in the last few months, including ousting Riggio's younger brother, Steve, as chief executive and announcing that it was considering a sale of the company.
Riggio noted that Burkle's statement had not taken into account the votes of Aletheia.
During the meeting, Chief Executive William Lynch described how Barnes & Noble, at a time when physical book sales were declining, was planning to grow by capturing more of the electronic book market with its Nook e-reader device.
He was followed by company employees who stood and voiced their support for Riggio.
"Without Len there will be no more Barnes & Noble," said Diane Simowski, who said she had worked for the company for 34 years. "Mr. Burkle has no idea how many lives Len has touched."
The meeting closed after just 45 minutes. Afterward some shareholders said they were surprised that Burkle didn't show up to present his case.
"He spent all this money soliciting us — he could have at least had the courtesy to show up," said shareholder Howard Tannenbaum.
Lynch said after the meeting that the company's strategic review would move forward, and that officials had already heard from many suitors interested in bidding for the bookseller.
When asked after the meeting whether he wanted to buy the company, Riggio, who had previously expressed interest in doing so, said: "At this point, I'm not interested."
A lawyer for Barnes & Noble later clarified that Riggio should have said he had no comment about his interest in buying the company.
Shares of Barnes & Noble rose 4 cents, or less than 1%, on Tuesday to close at $16.49.