Friday, August 13, 2010

After Court Rules for B&N, Burkle Starts Proxy Fight

   Reprinted with permission of Publishers Weekly


The decision yesterday by judge Leo E. Strine Jr. that upheld Barnes & Noble’s poison pill provision has led disgruntled shareholder Ron Burkle to mount a proxy fight for control of the bookstore chain. In deciding for B&N, judge Strine ruled that the large acquisition of B&N stock by Burkle’s Yucaipa Companies could be viewed as an attempt by the investor to gain control of the company without having to pay a premium to stockholders. 
 
After issuing a statement saying it was disappointed in the ruling, Yucaipa quickly upped the ante by announcing the firm would nominate three candidates to run for the B&N board, opposing the company slate that includes B&N chairman Len Riggio. In a statement accompanying the nominations, Yucaipa made clear it views Riggio’s hold over the company as a major reason why the stock price is undervalued.  “In our view, this Board’s failure to act independently of the Riggio family’s agenda has contributed to the Company’s poor stock performance, has enriched the Riggio family at the expense of the Company’s other stockholders, and has led to numerous corporate governance and strategic missteps. We believe the incumbent Board is rife with business and personal conflicts and historically has been a rubber stamp for the Riggio family’s interests,” the statement read. If elected, the three Yucaipa directors “would to be an effective check on related party transactions with the Riggios, and will protect the interests of all Barnes & Noble stockholders,” that statement concluded.
 
A B&N spokesperson praised the court’s ruling as protecting shareholders from Yucaipa’s attempt to gain control of the company without paying a premium price. The spokesperson added that Yucaipa’s decision to nominate its own board candidates,”makes clear that Yucaipa wants to gain control without paying a control premium to all shareholders.”
 
Yucaipa’s slate of nominees includes Burkle, Stephen F. Bollenbach, non-executive chairman of KB Home and member of the board of Time Warner Inc. and Macy’s, Inc.; and Michael S. McQuary, CEO of Wheego Electric Cars, Inc., and a Partner in Ellis, McQuary, Stanley & Associates, an Atlanta-based consulting and investment firm.
 
The court decision and Yucaipa’s launch of a proxy fight came after talks between B&N and Yucaipa to reach a settlement collapsed. Yucaipa said it will soon begin the process of actively soliciting votes for its slate, something the will make for a lively period up until the B&N shareholder meeting set for September 28.