Barnes & Noble Inc. is close to an accord giving billionaire Ron Burkle three board seats in exchange for dropping a lawsuit over limiting his stake in the company, said two people with knowledge of the matter.
Burkle and his investment vehicle, Yucaipa Cos., will also support the potential sale of the biggest U.S. bookstore, said the people, who declined to be identified because the talks are private. Barnes & Noble last week said it was exploring strategic options, including putting itself up for sale.
Yucaipa sued Barnes & Noble in May, seeking to invalidate the New York-based company’s “poison-pill” defense against takeovers so Burkle could boost his shareholding. An agreement between the parties may be signed today and announced shortly after, said the people. The billionaire may agree not to start a proxy fight for two years, they said.
“The ongoing dispute with Burkle was consuming substantial Barnes & Noble energy and time, and to some extent proving to be an unnecessary distraction,” David Schick, an analyst for Stifel Nicolaus & Co. in Baltimore, wrote in a note today. A settlement will let the board focus on finding potential acquirers, he said. Schick recommends holding the shares.
Burkle, with a stake of about 19 percent in Barnes & Noble, will still be able to bid to buy the whole company, the people said.
Barnes & Noble rose 43 cents, or 2.9 percent, to $14.91 at 10:16 a.m. in New York Stock Exchange composite trading. The shares had fallen 24 percent this year until today.
Frank Quintero, a Yucaipa spokesman, declined to comment.
The Wall Street Journal reported yesterday that Barnes & Noble and Yucaipa were close to a settlement.
Under pressure from Burkle, Barnes & Noble put itself up for sale as a shift to digital books led to losses. Chairman Leonard Riggio, the founder and biggest shareholder with about 30 percent, told the board that he may participate in an investor group to acquire the company.
In a meeting in November, the board of Barnes & Noble approved the poison pill, which would allow holders to buy large amounts of stock at a discount if another investor gains a stake of 20 percent or more. Burkle went to court in May over this measure.
One of Burkle’s appointees will be Stephen Bollenbach, chairman of KB Home and former Hilton Hotels Corp. chief executive officer, the people said. Burkle will appoint one other independent board member and a Yucaipa executive, they said.
Morgan Stanley is advising the company and Lazard Ltd. is advising the special committee of the board overseeing the sale process, the people said.
Barnes & Noble has tried to offset declining sales at its bookstores by investing in its digital-book reader, the Nook, and in applications to sell e-books. The company said in June that its market share of digital books in the U.S. grew to 20 percent from 2 percent since releasing the Nook in November.
The company forecast in June a possible loss of as much as 40 cents a share for the fiscal year because of a $140 million investment in its digital-book unit.
The Nook is competing with devices from Amazon.com Inc. and Apple Inc. Last month Amazon.com introduced two versions of its Kindle e-reader, including a $139 model that works with Wi-Fi and one for $189 that uses 3G-mobile technology and Wi-Fi to download books. Apple’s iPad features an e-reader and connects to a book store.