Billionaire Ron Burkle is taking his long-simmering battle with Barnes & Noble's (BKS) board of directors to court. According to an SEC regulatory filing, Burkle filed a complaint in Delaware court Wednesday alleging that the bookseller's "poison pill" measure, which bars individual outside shareholders from owning 20% or more of the company "is unfair and directors have breached fiduciary duties of loyalty, care and good faith."
The news comes the same day that Burkle's primary investment, the freezer storage warehouse company AmeriCold, said it was delaying its initial public offering indefinitely, a precipitous retreat from what was supposed to be the largest IPO of the year.
Burkle's complaint reiterates the main points of his ongoing conflict with B&N. Last November, through his holding company, Yucaipa Cos., Burkle bought up a substantial fraction of BKS stock, an amount which climbed over time to its current 19.62% level. Burkle's stock grab stemmed from his belief that B&N stock was undervalued, and from his desire to have more say in how the bookseller does business in the future.
B&N's board of directors responded with a shareholder rights plan (aka the "poison pill," intended to prevent a hostile takeover) that stopped Burkle and anyone else cold -- but exempted leading stockholder and current company Chairman Leonard Riggio, who currently owns 29% of the company's stock. Burkle sent an angry letter, which was quickly smacked down by the board. Burkle then rejected B&N's rejection, but that, too, was rebutted. Clearly, Burkle doesn't understand the word "no" very well, or at least is deliberately mishearing it.
That may be why the lawsuit filing repeats many of the same talking points as the previous missives he sent directly to the board. Burkle states that the poison pill measure "entrenches Leonard Riggio and the incumbent Directors while disenfranchising the Company's public stockholders by preventing the public stockholders from acquiring the same level of voting power that the Riggio family holds" while also "intended to protect and preserve the Riggio family's control" of the company. And, as he claimed succinctly in the complaint, Burkle believes the Riggios use B&N as their "personal piggy bank."
Barnes & Noble's Response: Suit is "Meritless," "Self-Serving"
Burkle implores the court to see things his way and do one of several things: command B&N's board to remove the poison pill proviso -- which he describes as a "self-dealing scheme" designed to curtail any sort of proxy battle; increase the share cap to 30% from the current 20%; or rule that Len Riggio and his brother Steve Riggio, the recently departed CEO and also a prominent stakeholder, be subject to the shareholder rights plan as well.
He also charges the company has "an unacceptable record of poor and declining performance." and has failed "to engage in substantive discussions" with Yucaipa, so Burkle says he will nominate three candidates to run against the three board members up for re-election -- Michael Del Giudice, Lawrence Zilavy, and Leonard Riggio -- at the annual shareholders meeting this fall.
In a statement to the Associated Press, B&N's board of directors called the complaint a "meritless lawsuit to advance [Burkle's] own self-serving agenda. The shareholder rights plan was adopted last November in response to a rapid accumulation of a significant portion of Barnes & Noble's outstanding common stock, and is intended to protect our shareholders from actions that are inconsistent with their best interests."
Clearly, the poison pill is sticking deeply in Ron Burkle's craw, and he is ready to use everything in his arsenal to get what he wants -- even if it means tying up the bookseller in a long, costly and nuisance-filled lawsuit for months or years to come.
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