* Riggio says poison pill not created out of self-interest
* Burkle eyes less restriction on proxy access, share buys
* Shares of Barnes & Noble rise 4.2 percent
By Jonathan Stempel
NEW YORK, July 9 The founder and chairman of
Barnes & Noble Inc (BKS.N) defended a "poison pill" plan
adopted by the largest U.S. bookseller that blocked billionaire
investor Ron Burkle from amassing large amounts of stock.
Testifying Friday at a nonjury trial in Delaware Chancery
Court, Leonard Riggio said Barnes & Noble's board adopted the
anti-takeover defense at a Nov. 17 meeting after Burkle's
Yucaipa Cos had taken a stake of nearly 18 percent.
"The board did that because it was very, very concerned
with the roll-up of stock at Yucaipa in the first place, that
they could gain control of the company by just continuing to
buy shares in the open market," Riggio said.
Asked whether he had at the meeting expressed concern that
Yucaipa could also push Barnes & Noble into an unwanted
takeover of troubled rival Borders Group Inc BGP.N, Riggio
said: "Close, but not exactly. Let's leave it at yes."
Burkle has maintained he does not want to buy Barnes &
Noble, yet believes the poison pill unfairly entrenches the
Riggio family's control of the New York-based company, which
Leonard Riggio founded in 1965.
A ruling in Burkle's favor could enhance Yucaipa's ability
to wage a proxy contest or add voting power, and perhaps take
steps to help arrest or reverse the 54 percent decline in
Barnes & Noble shares in the last 11 months.
The poison pill lets friendly shareholders buy large
amounts of stock at a steep discount should an investor like
Burkle amass 20 percent of the shares, diluting that stake and
perhaps making a takeover bid prohibitively costly.
Yucaipa said when it filed the lawsuit that it had a 19.6
percent Barnes & Noble stake, making it the largest outside
shareholder. It said the Riggio family owned 32.4 percent.
In its May 5 lawsuit, Yucaipa sought permission to take a
30 percent stake without triggering the poison pill, or void
voting rights for the Riggios beyond a 20 percent stake.
The trial began on Thursday before Vice Chancellor Leo
Strine Jr, and is expected to continue next week. Strine is not
expected to rule immediately when testimony concludes.
Proceedings were monitored online via Courtroom View Network.
PROXY BID POSSIBLE
Burkle testified on Thursday that he has never made a
hostile takeover bid or waged a proxy contest, though he plans
to propose three directors for Barnes & Noble at the company's
annual meeting, to be held by the end of September.
He also testified that Yucaipa in October 2009 considered a
$25-per-share buyout bid for Barnes & Noble, but abandoned the
idea as a "waste of time" because Riggio did not want a sale.
Gregory Taxin, a specialist in proxy matters, testified on
Friday the poison pill "will chill ordinary proxy activity,"
saying "the consequences of triggering the pill are cataclysmic
for an institutional investor."
Riggio said he did not know until shortly before the board
meeting that a poison pill would be considered.
Asked by one of Burkle's lawyers whether its creation "was
all about you and your family," he responded, "Not so at all.
It's about the company."
Barnes & Noble said last month it may lose as much as 40
cents per share in its current fiscal year. Sales totaled $5.81
billion in the year ended May 1. Borders, meanwhile, has had
several quarters of sales declines.
Shares of Barnes & Noble closed Friday up 54 cents or 4.2
percent at $13.28 on the New York Stock Exchange. They are down
37 percent since the lawsuit was filed.
The case is Yucaipa American Alliance Fund II LP et al v.
Riggio et al, Delaware Chancery Court, No. CA5465.
(Reporting by Jonathan Stempel, editing by Matthew Lewis)