It seemed mighty curious when billionare Ron Burkle's private equity firm Yucaipa Cos. suddenly doubled its stake in Barnes & Noble (BKS) between November 10 and 13. Burkle last week scooped up more than 4 million shares of the bookseller -- boosting his stake from 8.3% to 16.3% -- at an average price of $20.05.
And Burkle's stock spree wasn't finished. On Monday, he bought another 457,000 shares, at an average price of $20.48, The Wall Street Journal reported -- boosting his stake to 10.2 million shares, or 17.8%. That makes him B&N's second-largest shareholder, after CEO and founder Len Riggio, who's been on a quiet grab campaign of his own, boosting his stake over the past year to 36.8%.
With Burkle and Riggio together controlling the retailer, speculation abounded: Was a race afoot between two billionaires to wrest ultimate company control? B&N may have answered that yesterday when its board approved a Stockholder Rights Plan "intended to protect the company and its stockholders from efforts to obtain control of the company that are inconsistent with the best interests of the company and its stockholders."
In doing so, B&N is using a time-honored tactic in the public-company playbook: the "poison pill" provision. B&N is making a pre-emptive strike against Burkle -- or anyone else inclined to try a hostile takeover between now and November 27, 2012, when the Rights Plan expires. Should any person or group acquire or announce an offer that would acquire at least 20% of B&N's common stock, all other shareholders could snap up its stock at a 50% discount.
Burkle's most recent takeover moves may have sent up a red flag. In February 2006, Yucaipa took over Aloha Airlines, a public company for more than six decades, and took it private; two years later, the airline shut down. Yucaipa has also bought up grocery chains like Ralphs/Food4Less, Dominick's Chicago, and Wild Oats Markets for amounts hovering around the $1 billion ballpark -- only to turn around and sell them for profit. Ralphs went to Kroger for $8 billion after merging with Fred Meyer; Safeway bought Dominick's for $1.85 billion; and Whole Foods bought Wild Oats in 2005 for $565 million.
For Riggio, the problem with the poison-pill proviso is that it also prevents him from acquiring more stock. B&N for now would rather defend against interlopers than worry how it may affect the de facto head of the family, who's run the business since 1971.
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