The tussle over Barnes & Noble


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A fight for control over Barnes & Noble is underway -- a business-level fight, that is, all wrapped up in stock trades and boardroom politics. No fisticuffs -- at least, not yet.

Today Leonard Riggio, Barnes & Noble’s founder and chairman, exercised an option to buy almost a million more shares of the company. He’ll be spending $16.8 million on 990,740 shares, which brings his total to... well, a lot. Before the purchase, Riggio held about 29.9% of the company’s shares.


Like just about everything else in this economy, Barnes & Noble’s shares have taken a beating. Five years ago, they peaked at around $45 a share; nowadays they’ve dropped almost two-thirds, to about $16.

That might mean the company is in trouble, but it has made it attractive to someone -- namely, investor Ron Burkle. He’s already a large stockholder, possessing 19.2% of shares. The company doesn’t want another investor to take over -- in 2009, it implemented a poison pill that’ll be triggered if someone else’s shares reach 20%. Yes, Burkle is close. He tried to remove the poison pill by legal action this year, but a judge ruled against him Aug. 11. The Wall Street Journal reported:

Vice Chancellor Leo Strine of the Delaware court said Barnes & Noble was ‘reasonable’ in its decision to use the poison pill to ensure that Mr. Burkle couldn’t acquire control of the company while bypassing the board.

That action launched a proxy fight. There’s Burkle on one side, lining up his allies, and Riggio, lining up his in opposition, all hoping to tug the smaller remaining investors over to their sides. Riggio’s side has a small advantage, numbers-wise. Burkle’s investment company has nominated a slate for the board of directors that includes himself; Riggio is up for reelection.

If there isn’t some backroom arrangement beforehand, the power struggle will probably end at the company’s annual meeting Sept. 28.

Riggio, who leads the board of directors, is clearly dedicated to the bookselling business. While a college student at NYU, he worked in a Manhattan bookstore. Riggio soon opened his own bookstore, focused on college students, and then expanded and acquired until he’d built the nation’s largest bookstore chain. He’s acquired smaller chains, created megastores, added cafes, destabilized independent booksellers, survived the advent of and outclassed Borders, a once-worthy rival.


What makes Barnes & Noble so tempting for Burkle? The business dealings of his investment firm Yucaipa Cos. have made him the 297th richest person in the world, according to Forbes’ 2010 list. (Check out Yucaipa’s ridiculously humble website). He’s majority owner of a winning hockey team -- the Pittsburgh Penguins -- has a Beverly Hills home once owned by silent film star Harold Lloyd, an 11,000-square-foot penthouse in Manhattan and a Boeing jet. His celebrity friends have included P. Diddy and Bill Clinton. What does he want with a big chain bookstore? Is it the bargain price? The thrill of acquisition? Could he want to chop the company up? Or maybe he just loves books, like the rest of us.

If Riggio maintains control, chances are Barnes & Noble will continue on its path, which is open to adaptation but relatively predictable (it’s a bookstore). If Burkle gets control, well, then things could certainly get interesting.

-- Carolyn Kellogg