Barnes & Noble's chairman fends off Burkle

NEW YORK Tue Sep 28, 2010 6:24pm EDT

A patron browses through a book at the Barnes and Noble bookstore on the corner of Warren and Greenwich street in New York June 29, 2010. REUTERS/Lily Bowers

A patron browses through a book at the Barnes and Noble bookstore on the corner of Warren and Greenwich street in New York June 29, 2010.

Credit: Reuters/Lily Bowers

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NEW YORK (Reuters) - Barnes & Noble Inc (BKS.N) Chairman Leonard Riggio narrowly defeated an attempt by dissident investor Ron Burkle to join the top U.S. bookseller's board and said the company would be soliciting interested buyers.

Preliminary results from Tuesday's annual shareholder meeting showed that holders of 44 percent of the shares eligible to be voted supported the slate chosen by Riggio, while 39 percent supported Burkle's slate, according to a source familiar with the results. The rest did not vote, or withheld their votes.

The overall outcome was confirmed by both Barnes & Noble and by Burkle's Yucaipa investment firm. Certification of final results could take several days.

The vote resolves a bitter proxy war between the two billionaires and clears a major obstacle to Barnes & Noble's pursuit of a sale, first announced in August. Shares of the company closed up 4 cents, or 0.24 percent, at $16.49.

"Our job is to get a lot of other bidders interested," Riggio, the largest Barnes & Noble shareholder with a 28.2 percent stake, told reporters after the meeting in New York.

Some 20 groups have signed, or are expected to sign, confidentiality agreements ahead of potential bids, with books on the company being sent as of Tuesday, cable business channel CNBC said.

Riggio had said previously that he would look for partners to buy the company, but declined to elaborate on his current plans. On Tuesday, he said he did not want to engage with Burkle given the personal tone of the rhetoric during the proxy war.

Burkle, whose investment firm Yucaipa owns 18.8 percent of the company, said Riggio must conduct a transparent auction that delivers the best possible outcome for investors. Some investors and analysts say Burkle may make a bid of his own.

"The best way (Riggio) can support the company's efforts to maximize stockholder value is a clear and unequivocal public commitment to support the highest bid for the company, even if it is submitted by a third party, if he himself decides to make a bid," Burkle said.

Burkle started buying shares in Barnes & Noble in November 2008, paying about $18 to $22 per share. Despite a 35 percent stock surge since the sale process was announced, Burkle would lose money if he sold shares at current prices.

"He is still far underwater with his investment. He could stay and pepper the board and Riggio," said Morningstar analyst Peter Wahlstrom, who estimates the fair value of Barnes & Noble shares at about $13.

NO GAME PLAN

Burkle has accused Riggio of running the bookstore chain for his personal benefit and leaving it ill-prepared for a shift to electronic books that has kept its sales in decline.

Burkle had the support of influential shareholder advisory firm Institutional Shareholder Services Inc, but never put forth a detailed business plan, drawing criticism from analysts and some shareholders.

Burkle, who is based in Los Angeles, did not attend the shareholder meeting in Manhattan.

"Burkle didn't have the courtesy to show up," said individual investor Howard Tannenbaum. "Riggio and his brother built up the company. What does Burkle know about book selling?"

Some 43 percent of shareholders also rejected Burkle's proposal to amend an anti-takeover "poison pill" put in place by the company in November after Yucaipa doubled its stake in a matter of days, the source familiar with the results said. About 39 percent supported the proposal.

The poison pill limits any shareholder, except for Riggio, who is grandfathered, from holding 20 percent or more of the company. Shareholders are set to vote in a special meeting on November 17 on whether to ratify the proposal.

Burkle sought to raise the poison pill's trigger to 30 percent and is appealing a Delaware court ruling in August to uphold it.

Along with Riggio, outside directors David Golden, a partner in investment firm Revolution LLC, and David Wilson, chief executive of the nonprofit organization that runs the Graduate Management Admission Test, were elected to the board for three-year terms.

At the meeting, Chief Executive William Lynch reiterated the company's goals to achieve 25 percent of the e-books market by 2014 as a way to counter stagnant physical book sales.

The retailer also plans to use much of its freed up shelf space to stock more games and toys. "Early tests have shown promising results," Lynch said.

(Editing by Maureen Bavdek, Gunna Dickson, Matthew Lewis and Carol Bishopric)

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