Barnes & Noble Kicks Off Burkle Proxy Fight With Strongly Worded Letter

Barnes & NobleA day after reporting a heavier quarterly loss than investors were expecting, Barnes & Noble's (BKS) board of directors has sent a letter to shareholders urging them to vote for their trio of directors up for election -- including founder and chairman Leonard Riggio -- and rebuff Ron Burkle's proxy fight.

Burkle is trying to land three seats on the board as part of his efforts to gain control of the bookseller. The letter is part of annual-meeting materials B&N mailed to shareholders, formally launching its proxy battle.

The board's entertainingly written letter, filled with upper case text, was filed with the SEC on Wednesday morning. The directors urged shareholders to reject Burkle's proposals for B&N at the annual shareholders meeting on Sept. 28 on the grounds that they "would weaken shareholder protections and could allow Burkle to team with another investor, Aletheia Research & Management, to take control of the Company without paying shareholders a premium."

Trying to "Gain Creeping Control"

The connection between Yucaipa and Aletheia, first pointed out by DailyFinance, runs quite deep, with the two companies accumulating approximately 60% of the total stock in supermarket chain A&P (GAP).

The B&N board believes Burkle and Aletheia's actions "are part of a similar effort to gain creeping control of Barnes & Noble" and adds: "Burkle claims he is not working together with Aletheia to gain control of Barnes & Noble, but can you really believe that?"

The only thing stopping the two firms from accumulating a similar joint majority stock holding is the "poison pill" measure triggered by a threshold of 20% total stock -- and which spurred Burkle's lawsuit in Delaware Chancery Court. "But guess what? He LOST," crowed the board.

Attacking Burkle's Involvement in Tech Missteps

B&N's board also criticizes Burkle for having "no strategic vision and no plan for the company's future" at a time when the retailer's total e-book share has gone from zero to approximately 20% in less than a year. (B&N's digital sales were the brightest spot in the most recent quarter's results.)

Worse, the board charges, Burkle and his chosen board nominees "have been involved in some of the most spectacular technology and corporate failures in history" -- troubling, "given the importance of technology to Barnes & Noble in building its electronic book business."

Specifically, the board brings up Burkle being on the board of Yahoo! (YHOO) when it rejected Microsoft's acquisition bid, Stephen Bollenbach's ties to the expensive and eventually failed merger between Time Warner (TWX) and AOL (which owns DailyFinance), and Michael McQuary being "pushed out" of Earthlink after its stock price declined 70% during his tenure as president. Both Bollenbach and McQuary are Burkle-nominated candidates for election to B&N's board.

Again and again, Barnes & Noble's board stresses that shareholders who support Burkle are voting for the billionaire's self-interest and against the interests of company shareholders. Metaphorically speaking, and in keeping with the designated color scheme for the proxy contest, siding with B&N is, in their minds, a vote for the white knight. Choosing Burkle, in the board's view, means shareholders will bleed copious amounts of cash for gold that will sink the company's way of doing business.

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Ron Burkle's poison pill reaches into other businesses. Ron Burkle was on KB Home Board of Directors when he built this Lemon. he has never answered a single letter sent to him. B&N customers to expect the same customer service, rape and pillage your other investors for personal gain, say good bye to the cozy atmosphere you used to know at B&N. Google "KB Home Sucks" I'm not the only one abandoned by Burkle and KB Home. Burkle and Bollenbach led KB Home to it's lowest share price ever, this year. Lack of creativity and the good ol boy network lives. Just because your a Billionaire does not excuse your behavior, obviously the billions were made on the backs of the small guy. Ron and Stevie you’re both a disappointment not a savior of society. But only money matters. Bollenbach also led AIG into financial ruin on their Board, oh yea you and I are bailing him out here too.

September 02 2010 at 3:30 AM Report abuse rate up rate down Reply

I sure don't want a takeover of B&N... Whatever their founder did, he did it right. B&N is a wonderful bookstore; the best I've ever experienced (B. Dalton, Borders, Left-end Books...). When you've got a good thing going, everybody wants a piece of it. Leave some shares for the little guy (like me) to invest in!

August 27 2010 at 12:09 PM Report abuse rate up rate down Reply

When I was in college, Barnes & Noble ripped me off on my textbooks. As an adult, I worked my butt off for them for three years and was paid slave wages. Now they're in financial trouble? GOOD! It couldn't happen to a nicer company. What goes around comes around, and I hope this miserable company goes out of business soon.

August 26 2010 at 11:03 PM Report abuse rate up rate down Reply

Because of book prices I now wait until books in print become loss leaders on sale at both Borders and Barnes and Noble. I do not care for e-books so that portion of the industry does little for me. But in terms of authors I have given up reading a number of them because of the high cost of their material which I am sure they see very little of in their bank accounts. I have a lot of books in my book room but fewer and fewer are added each year and that means my money is goign elsewhere.

August 26 2010 at 4:01 PM Report abuse rate up rate down Reply

I object to the corporate shennagans too, but I have a bigger gripe. The cost of even paperbacks has reached painful heights. By changing the size of the books, prices have soared 25 to 100 percent, to as high as $16 for no more book than when the price was $8. Even that price was a 30% rise from before. While the authors and the booksellers don't price the books, both ought to realize that any reduction of sales is due to somebody's greed, and that means a loss to them. I have already, with great difficulty due to the balkanization of the publishing industry into a hodgepodge of subsidiaries of greater monoliths)that I will now cease buying their books so long as the new titles continue to be priced at these higher and arbitary levels. I have heard from a few of the authors, of those few who actually can be reached directly, who agree with me but claim impotence with regard to pricing. I suggested smaller advances with tongue in cheek, but otherwise understood their point. Whether B&N survives, or Borders, or Books a Million, I intend now to search the after market for used books.

August 26 2010 at 1:41 PM Report abuse rate up rate down Reply

Like most of the very rich, Burlke is mostlh interested in himself, himself, and himself.

August 26 2010 at 1:37 PM Report abuse rate up rate down Reply

I read books. Lots of books. I get the vast majority of them from B&N. I would be very unhappy to lose B&N because of some stock manipulating big wig.

August 26 2010 at 10:13 AM Report abuse +2 rate up rate down Reply

Doesn't Barnes and Noble know that sometimes the old advertising campaign works better than the new? Have been a loyal customer for many years and have a membership for those years but currently their online site advertising absolutely reeks desperation. Wake up!

August 26 2010 at 7:26 AM Report abuse rate up rate down Reply