Barnes & Noble turns back Burkle

The L.A. bil­lion­aire in­vestor loses his bid to re­make the book­seller’s board.

Los Angeles Times - - Business - Nathaniel Pop­per re­port­ing from new york An­drea Chang re­port­ing from 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 cru­cial to the fu­ture of the com­pany, with Barnes & Noble ex­ec­u­tives fa­vor­ing a steady, tried-andtrue 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-roomonly 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-per­cent­age­point 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 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. 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

RE­BUFFED: Ac­tivist in­vestor Ron Burkle owns roughly 19% of Barnes & Noble.

Brian van der Brug

PLOT TWIST: Barnes & Noble’s lead­er­ship fa­vored a steady, tried-and-true method of run­ning the world’s largest book­seller while in­vestor Ron Burkle wanted a ma­jor shake-up, though he did not make an ap­pear­ance at Tues­day’s share­holder meet­ing. Above, a Barnes & Noble store at the West­side Pavil­ion in Los An­ge­les.

Alex Bran­don

‘GREAT DAY’: Barnes & Noble Chair­man Leonard Rig­gio was vindi­cated by the vote.

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