Barnes & Noble chairman testifies of Burkle worry
The founder and chairman of Barnes & Noble Inc defended a poison pill plan adopted by the largest U.S. bookseller that blocked billionaire investor Ron Burkle from amassing large amounts of stock.
Testifying Friday at a nonjury trial in Delaware Chancery Court, Leonard Riggio said Barnes & Noble's board adopted the anti-takeover defense at a November 17 meeting after Burkle's Yucaipa Cos had taken a stake of nearly 18 percent.
The board did that because it was very, very concerned with the roll-up of stock at Yucaipa in the first place, that they could gain control of the company by just continuing to buy shares in the open market, Riggio said.
Asked whether he had at the meeting expressed concern that Yucaipa could also push Barnes & Noble into an unwanted takeover of troubled rival Borders Group Inc , Riggio said: Close, but not exactly. Let's leave it at yes.
Burkle has maintained he does not want to buy Barnes & Noble, yet believes the poison pill unfairly entrenches the Riggio family's control of the New York-based company, which Leonard Riggio founded in 1965.
A ruling in Burkle's favor could enhance Yucaipa's ability to wage a proxy contest or add voting power, and perhaps take steps to help arrest or reverse the 54 percent decline in Barnes & Noble shares in the last 11 months.
The poison pill lets friendly shareholders buy large amounts of stock at a steep discount should an investor like Burkle amass 20 percent of the shares, diluting that stake and perhaps making a takeover bid prohibitively costly.
Yucaipa said when it filed the lawsuit that it had a 19.6 percent Barnes & Noble stake, making it the largest outside shareholder. It said the Riggio family owned 32.4 percent.
In its May 5 lawsuit, Yucaipa sought permission to take a 30 percent stake without triggering the poison pill, or void voting rights for the Riggios beyond a 20 percent stake.
The trial began on Thursday before Vice Chancellor Leo Strine Jr, and is expected to continue next week. Strine is not expected to rule immediately when testimony concludes. Proceedings were monitored online via Courtroom View Network.
PROXY BID POSSIBLE
Burkle testified on Thursday that he has never made a hostile takeover bid or waged a proxy contest, though he plans to propose three directors for Barnes & Noble at the company's annual meeting, to be held by the end of September.
He also testified that Yucaipa in October 2009 considered a $25-per-share buyout bid for Barnes & Noble, but abandoned the idea as a waste of time because Riggio did not want a sale.
Gregory Taxin, a specialist in proxy matters, testified on Friday the poison pill will chill ordinary proxy activity, saying the consequences of triggering the pill are cataclysmic for an institutional investor.
Riggio said he did not know until shortly before the board meeting that a poison pill would be considered.
Asked by one of Burkle's lawyers whether its creation was all about you and your family, he responded, Not so at all. It's about the company.
Barnes & Noble said last month it may lose as much as 40 cents per share in its current fiscal year. Sales totaled $5.81 billion in the year ended May 1. Borders, meanwhile, has had several quarters of sales declines.
Shares of Barnes & Noble closed Friday up 54 cents or 4.2 percent at $13.28 on the New York Stock Exchange. They are down 37 percent since the lawsuit was filed.
The case is Yucaipa American Alliance Fund II LP et al v. Riggio et al, Delaware Chancery Court, No. CA5465.
(Reporting by Jonathan Stempel, editing by Matthew Lewis)
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