![images16[1]](http://www.teleread.com/wp-content/uploads/2010/09/images161.jpg "images16[1]")
It’s no secret that Barnes & Noble is in financial trouble. Under siege from Amazon and Wal-Mart for printed books (and Amazon and Apple for e-books), its market value has shrunk to less than $1 billion, and it has been considering putting itself up for sale.
And now, its board is in the middle of an obnoxious battle for control with investor Ronald W. Burkle over three board seats—including the seat held by Leonard S. Riggio, the chairman. Riggio’s family has long held a great deal of influence over B&N, and Burkle feels that it is too much. He points to the purchase of a college bookstore business owned by Riggio and his wife for over $500 million as one example of this, and also states that B&N’s executives are overpaid in light of its stock performance.
Burkle has also expressed doubts that B&N’s plan to sell itself will be fair and open to bidders other than Riggio, who has said he may make an offer.
A prestigious proxy advisory firm, Institutional Shareholder Services, has come out on Burkle’s side, suggesting that “the dissidents have demonstrated a compelling case that change in the BKS board is warranted.”
No matter whether Riggio remains in control or Burkle forces a change to board members “who [don’t] say, ‘That’s the most amazing thing I ever heard’ every time Len opens his mouth,” it could have implications for the rest of the e-book industry—Barnes & Noble might be running second place to Amazon, but it still has an estimated 20% of the entire e-book market, and a change in the board might also lead to a change in B&N’s e-book strategy.
Before singing the praises of Mr Burkle and his team of take-over buddies, it is worth pointing out the remarks of the Judge who denied them the suit which was to over-turn the “poisin pill”. The judge found the pill was in line with existing shareholders (all of them) interests and was acceptable. In his nearly 90 page judgement, the Judge makes some damning indictments of the motives and capabilities of Burkle and company. In fact, the judgement from Aug 12, which is online at New York Times and elsewhere, makes entertaining reading.
On pg 57, the Judge notes of Burkle’s Yucaipa team: “At bottom, Yucaipa is simply positing an absurd scenario, at best fit for a discussion by a Red Bull fueled group of nerdy second year law school corporate law junkies, who find themselves dateless (big surprise) on yet another Saturday night.”
I would not rush to judgement that Yucaipa is the saviour for B&N; current management may, in fact, the best suited given the tough market the whole bricks and mortar industry is in.