Yucaipa Cos. said it challenged a Delaware judge’s decision upholding Barnes & Noble’s poison pill anti-takeover defense during a fight for control of the U.S.’s largest bookstore chain.
Officials of Los Angeles-based Yucaipa, headed by billionaire Ron Burkle, said in a statement today they asked the Delaware Supreme Court to overturn a ruling that Barnes & Noble properly enacted the defense. Burkle is waging a proxy fight to replace three of the company’s directors.
“We believe that the important stockholder rights at issue in our suit” must be reviewed by the state’s highest court, Frank Quintero, a Yucaipa spokesman, said in the release.
Yucaipa sued New York-based Barnes & Noble saying Chairman Leonard Riggio and other directors engineered a “self-dealing scheme designed to entrench the Riggio family” and stop Burkle from gaining control of board seats. Burkle targeted the company’s poison-pill defense in the suit.
The company adopted the poison pill, designed to make takeovers prohibitively expensive, in November after Burkle said his stake in the bookseller rose to 17 percent. Burkle argued that the pill was improperly designed and unfairly stymied his efforts to gain control of the board seats.
Judge’s Ruling
Delaware Chancery Court Judge Leo Strine rejected Burkle’s claims last month, finding the defense wasn’t defectively designed and didn’t hamper the investor’s chances in the proxy fight. Yucaipa’s Barnes & Noble stake is now 19 percent. The pill takes effect when an outside shareholder’s interest reaches 20 percent.
Burkle’s appeal forces Barnes & Noble to spend more on legal fees in the case, the company said. The company said on Aug. 24 that it may report a loss in the current quarter as costs of its proxy contest with Burkle climb.
“We are not surprised Mr. Burkle cannot accept defeat in the baseless litigation he brought,” Mary Ellen Keating, a Barnes & Noble spokeswoman, said in an e-mail.
The company said in August that it was examining a possible sale and that Riggio, its largest shareholder with about 29 percent, may be a bidder.
Barnes & Noble rose 47 cents, or 3 percent, to $16.10 in New York Stock Exchange composite trading. The shares have dropped 16 percent this year.
The case is Yucaipa American Alliance Fund II LP v. Riggio, CA5465, Delaware Chancery Court (Wilmington).
To contact the reporter on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net.
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