Barnes & Noble's Riggio Says He Didn't Probe Trial Foe Burkle's Background
Barnes & Noble Inc. Chairman Leonard Riggio testified that he’s been displeased for years with Yucaipa Cos.’ Ron Burkle, who is asking a judge to change the bookseller’s “poison pill” anti-takeover defense so he can buy more of its stock.
“I was completely unhappy with our partnership” in other companies over the last decade, Riggio said in testimony in a trial of Yucaipa’s lawsuit in Wilmington, Delaware. “I didn’t like the idea he invested in Barnes & Noble” and “I didn’t think highly of his judgment.”
Today was the second day of the nonjury trial being heard by Judge Leo Strine Jr. Riggio has testified live and on videotape. The trial continues July 12.
Burkle had “a good relationship” with Riggio until he began accumulating the stock, the Yucaipa chairman testified yesterday in court.
Yucaipa sued Barnes & Noble’s directors May 5, alleging they orchestrated a “self-dealing scheme” designed to keep the Riggio family in control of the company and prevent Burkle from buying blocks of stock and gaining board seats.
Yucaipa, based in Los Angeles, is the biggest outside shareholder of New York-based Barnes & Noble, the largest U.S. bookstore chain.
Barnes & Noble directors put the poison pill in place to thwart what they said they perceived as a hostile takeover bid. Burkle contends he is buying stock to enhance his ability to put candidates on the board and improve company operations, according to court papers.
In further testimony today, Riggio said he was the founding shareholder of the company, has always been the largest shareholder and “I have a strong preference for being the largest shareholder of Barnes & Noble.”
While the lawsuit claims Riggio and other directors adopted the poison pill to stymie Burkle’s attempt to equal Riggio’s stake, Riggio said “I didn’t even know poison pills were allowed” until company lawyers drafted one.
Burkle’s Yucaipa holds more than 19 percent of the stock, according to data compiled by Bloomberg. The Riggio family owns about 32 percent.
The poison pill is a shareholder rights agreement that allows investors to buy large amounts of stock at bargain prices if an outsider acquires 20 percent or more of the shares. The plan, designed to make a hostile takeover prohibitively expensive, “is intended to protect our shareholders,” Barnes & Noble said in court papers.
Buckle in his complaint criticized management for buying Barnes & Noble College Booksellers Inc. last year from Riggio for $514 million. He also questioned company lease agreements giving the Riggios annual rent of more than $5 million, the purchase of $8.25 million in textbooks from a Riggio affiliate, and the contracting of freight services from Riggio interests for shipping to retail stores.
Barnes & Noble, with $5.81 billion in sales for the year ended May 1, said last month it might see a loss of as much as 40 cents a share this fiscal year because of a $140 million investment in its digital-book unit.
Barnes & Noble rose 54 cents or 4.2 percent to $13.28 at 4:15 p.m. in New York Stock Exchange composite trading.
The case is Yucaipa American Alliance Fund II LP v. Riggio, CA5465, Delaware Chancery Court (Wilmington).