Barnes & Noble Inc. lost a bid to dismiss an investor lawsuit claiming some directors violated their duties in the $596 million buyout of a college bookstore chain from the retailer’s founder, Leonard Riggio.
Barnes & Noble, the largest U.S. bookstore chain, was sued in August 2009 in Delaware Chancery Court by the Louisiana Municipal Police Employees Retirement System, which claimed the payment for Barnes & Noble College Booksellers Inc. was “well beyond” a fair price, and that some board members were conflicted by long-term friendships with Riggio. The founder, with about a 30 percent stake in the company, “used his influence” to facilitate the buyout, the retirement system claimed.
The process “gives off a very fishy smell,” Judge Leo Strine Jr. said at a hearing today in Wilmington, where he refused to dismiss the case, paving the way for more proceedings and an eventual trial.
Mary Ellen Keating, a Barnes & Noble spokeswoman, didn’t immediately return a voice-mail message seeking comment on the ruling.
Riggio is likely to buy Barnes & Noble itself after shareholders re-elected him to the board last month, according to Louis Meyer, an analyst for Oscar Gruss & Son Inc., which estimated the takeover price at $18 a share.
Riggio agreed to get board approval before joining a group to make a bid, and said he would make sure it would be bought by the highest bidder, according to a regulatory filing yesterday.
Barnes & Noble, based in New York, rose 7 cents to $15.03 at 4:15 p.m. in New York Stock Exchange composite trading.
The case is Louisiana Municipal Police Employees Retirement System v. Leonard Riggio, CA4813, Delaware Chancery Court (Wilmington).