Sept. 28 (Bloomberg) -- Barnes & Noble Inc.’s shareholders voted to keep Chairman Leonard Riggio on the board of the company he founded, rejecting an attempt by Ron Burkle’s Yucaipa Cos. to shake up the largest U.S. bookstore chain.
Riggio, the biggest shareholder, was re-elected to the nine-member board with 53 percent of the vote, people familiar with the situation said. Eighty-three percent of outstanding shares were voted, said the people, who declined to be identified because the results aren’t public. The slate from Yucaipa, the second-largest holder, included Burkle.
Barnes & Noble is attracting “a lot of interest” as the board contemplates a possible sale, a process that the proxy vote delayed, Chief Executive Officer William Lynch told Bloomberg Television today. Burkle and Riggio clashed for a year on strategy as the company tries to keep 700 superstores profitable amid the growing popularity of digital books.
“Our job is to get a lot of bidders interested,” said Riggio, 69, after the meeting. Riggio said he isn’t part of a group that plans to bid. He declined to comment on Burkle.
Barnes & Noble, based in New York, rose 4 cents to $16.49 at 4:01 p.m. in New York Stock Exchange composite trading. The shares have dropped 14 percent this year.
Riggio’s re-election “is not a hindrance” to a sale, said Peter Wahlstrom, an analyst with Morningstar in Chicago. “You’ve got somebody who has been the patriarch of the industry for 45 years and knows the business in and out. That knowledge is valuable as the process goes forward.”
Share Amendment Fails
Shareholders rejected Yucaipa’s proposed amendment to increase the shares allowed to be owned under the company’s takeover defense, a so-called poison pill. The defense, enacted last year, caps the amount of shares that can be owned at 20 percent. Yucaipa wanted to increase it to 30 percent.
A shareholder vote on whether to keep the pill, mandated when it was enacted last year, will take place by Nov. 17. A date hasn’t been set.
David Golden, a partner at investment firm Revolution LLC, and David Wilson, CEO of the Graduate Management Admission Council, will join Riggio on the board.
A Yucaipa victory would have named as directors Stephen Bollenbach, chairman of KB Home, and Michael McQuary, CEO of Wheego Electric Cars Inc.
With none of his directors on the board, “we don’t have any comfort that this strategic review by this independent committee is actually going to be independent and go through the process that you’d expect to attract bidders,” Burkle said by telephone. Yucaipa isn’t part of the bidding, he said today.
Focus Beyond Books
Yucaipa may consider making a bid on the condition that Riggio agreed to vote for the highest offer, Burkle said. Riggio said today that he would do what’s best for shareholder value.
Barnes & Noble, which released the Nook reader last year to compete with Amazon.com Inc.’s Kindle, will have a difficult time being successful as a device maker because competitors have more money and expertise, Burkle said. The company should take a page from Indigo Books & Music Inc., a Canadian chain, and revamp stores to sell more non-book items, he said.
The retailer posted a loss excluding one-time items of $1.02 a share in the three months ended July 31 as sales at stores open at least 15 months fell 0.9 percent, the 11th straight drop. The average estimate from analysts was for a loss of 80 cents a share.
Barnes & Noble overcame Yucaipa receiving the support last week of Institutional Shareholder Services, often considered the most influential proxy adviser. Adviser firms Glass Lewis & Co., Proxy Governance Inc. and Egan-Jones Ratings Co. backed Barnes & Noble last week.
“The dissident has given insufficient reason to support its contest,” Glass Lewis said in its report. “We fail to see by what measure the dissident’s limited plans offer greater value to shareholders.”
Burkle started to buy Barnes & Noble shares in November 2008 and by January 2009 owned 8.3 percent of the company. After Barnes & Noble agreed to purchase Barnes & Noble College Booksellers Inc. from Riggio in August 2009, Burkle criticized the deal in a letter to Riggio.
The stock dropped after the college deal and Yucaipa bought more shares and said in a filing on Nov. 13 that its stake increased to more than 17 percent. The board adopted a provision four days later that capped shares acquired by a single shareholder at 20 percent. Riggio owned about 27 percent at the time it was adopted and was prohibited from buying more shares.
Burkle, who owned about 19 percent of shares as of May 5, asked the board unsuccessfully in January to increase the amount that can be owned to 37 percent. Yucaipa filed a lawsuit in May to have the provision overturned. Barnes & Noble said Aug. 3 it was considering a sale of the company. A Delaware judge upheld the provision on Aug. 12 and a few hours later Yucaipa filed a proxy to get board seats and raise the share limit.
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