Burkle to appeal Barnes & Noble poison pill ruling

NEW YORK Thu Sep 2, 2010 4:22pm EDT

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NEW YORK (Reuters) - Billionaire investor Ron Burkle plans to appeal a Delaware court ruling that upheld an anti-takeover "poison pill" put in place by bookseller Barnes & Noble Inc (BKS.N).

Burkle, whose Yucaipa Companies firm owns 18.8 percent of Barnes & Noble's shares and is its second largest shareholder, is locked in a proxy battle with the largest U.S. bookstore chain. He is seeking to install three directors, including himself, at the company's annual meeting later this month.

A Delaware Chancery Court judge in August ruled that the poison pill would not prevent Burkle from winning a proxy contest.

Barnes & Noble, the largest U.S. bookstore chain by sales, put the pill in place in November after Burkle doubled his stake in the retailer within a four-day span. The pill limits any one shareholder from amassing more than 20 percent of shares.

Burkle has asked shareholders to vote for his proposal to raise the threshold at which the poison pill is triggered to 30 percent.

Burkle launched his proxy war hours after the ruling, and has argued that Barnes & Noble Chairman Leonard Riggio, who founded the retailer and is its top shareholder with a 28.2 percent stake, has run the chain for his own benefit.

Burkle's investment firm, Yucaipa Companies, said in a statement that the case should be decided by the Delaware Supreme Court.

A spokeswoman for Barnes & Noble said in a statement, "We are not surprised Mr. Burkle cannot accept defeat in the baseless litigation he brought against Barnes & Noble and that he would now force the company to incur further legal costs."

Yucaipa, which said on Thursday it had filed a notice of appeal because of Riggio's decision in August to exercise options to buy Barnes & Noble shares, argued that the lower Delaware court had made its ruling on the premise that Riggio would not exercise any of those options.

Riggio bought 990,740 shares at a strike price of $16.96, or $16.8 million. Riggio, who is up for re-election to the board on a slate with two outside directors, has said he would not vote those shares at the shareholders meeting.

The tone between the two parties has grown harsher. Last week Barnes & Noble said Burkle was unfit to sit on its board and on Monday, Burkle accused the company of using scare tactics to sway shareholders and striking sweetheart deals with members of the Riggio family.

Barnes & Noble has charged that Burkle along with another large institutional investor, Aletheia Research & Management, is planning to take control, an accusation Burkle has denied.

Last month, the bookseller, which is grappling with a long sales decline, said its battle with Burkle would plunge it further in the red this year. [nN24243498]

Shares closed up 3 percent at $16.10.

The case is Yucaipa American Alliance Fund II L.P vs Riggio et al, Case No. 5465-VCS, Court of Chancery of the State of Delaware.

(Reporting by Phil Wahba, Editing by Phil Berlowitz, Bernard Orr)

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