Barnes & Noble Inc is in talks to end a battle with one of its top investors, a source with knowledge of the discussions said, as the bookseller tries to attract buyers for its business.

Billionaire Ronald Burkle sued in Delaware Chancery Court to void the New York-based company's poison pill anti-takeover defense, which he said entrenches the Riggio family that started the company.

The rift between Burkle and the company was seen as a barrier to a potential sale of the chain, given his sizable stake. Founder and chairman Leonard Riggio is seeking investors to join him in making a bid for the company, which has drawn interest from several private equity firms.

A settlement for Barnes & Noble could come soon, perhaps in the next 24 hours, the source told Reuters late on Wednesday.

The settlement could involve adding three directors to the nine-person board, the source said, adding that the talks still might fall apart.

Barnes & Noble's shares rose 3.6 percent to $15 on news of the talks, giving it a market value just under $880 million.

The talks between Burkle and Barnes & Noble were earlier reported by The New York Times and The Wall Street Journal.

Burkle's investment firm Yucaipa Cos recently owned 19.6 percent of Barnes & Noble stock.

AVOIDING A PROXY FIGHT

The source said that under the proposed accord, Barnes & Noble would eventually give up one director. It would require Burkle to withdraw his lawsuit, agree not to start a proxy fight and support the company's director candidates in 2010 and 2011, the source said.

According to the Journal, one independent director expected to be added is Stephen Bollenbach, a former Hilton Hotels chief executive who is now chairman of KB Home . The homebuilder did not return a call seeking comment.

At the trial, Burkle testified that Yucaipa had in October 2009 considered, but then decided against, pursuing a $25 per share buyout bid for Barnes & Noble. He said he considered that a waste of time, given the Riggio family's effective control of 38.2 percent of the stock.

Leo Strine, the Delaware vice chancellor, is expected to rule soon in the case.

Barnes & Noble and Yucaipa did not return requests for comment. Both declined to comment to the Journal. Mary Ellen Keating, a spokeswoman for Barnes & Noble, and Frank Quintero, a spokesman for Yucaipa, declined to comment to the Times.

(Reporting by Sue Zeidler in Los Angeles and Jonathan Stempel in New York; additional reporting by Megan Davies in New York; Editing by Muralikumar Anantharaman and Robert MacMillan)

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