When Billionaires Attack: Burkle Rejects B&N's Rejection

Ever since the board of Barnes & Noble (BKS) stomped on billionaire Ron Burkle's bid to buy up a mountain of stock late last year, it's been a strange and entertaining mix of possible backroom deals, angry letters, and more smackdowns. This week, Burkle proved he hasn't stopped trying to claw his way to a majority stake in the retailer.

In a letter to the board filed with the SEC Thursday, Burkle again got right to the point: "I am disappointed by your rejection of my request that Yucaipa be allowed to acquire the same level of share ownership as the Riggio family is allowed under the poison pill. I believe that once again this Board has chosen to protect the personal interests of the Riggio family over the interests of the Company's public shareholders."

Burkle also still says -- and objects -- that chairman Leonard Riggio and his brother, CEO Steve Riggio, own 37% of common stock between them. The board stated in its most recent communication that their holding is closer to 31%.

'Confusing and Ambiguous'

Burkle contends that his "simple question" of whether the Riggio family can "collectively own 50% or more of the common stock without triggering the poison pill" has not only not been answered, but that B&N's modification of the rule that limits stakeholders to a cap of 20% of total company stock is "even more confusing and ambiguous than the flawed provisions they presumably were designed to fix."

Burkle asks: "Can the Riggio family collectively own 50% or more of the common stock without triggering the poison pill? Your shareholders have a right to know the answer to this basic question, and your refusal to answer is troubling."

Burkle expresses further disappointment that no one from the board contacted him "before unilaterally rejecting my request that Yucaipa be allowed to acquire the same level of share ownership as the Riggio family," and he seeks a meeting with the board "to discuss my request and other concerns about the Company's corporate governance policies and practices." The only caveat? That the Riggios not be allowed to vote their shares -- "because the Riggios have a clear personal interest in the benefits this poison pill gives to them and to no other shareholders."

Now, if you're starting to think that the Burkle vs. B&N battle is moving towards circular logic, you'd be correct. The company enacted the "poison pill" to stop anyone -- especially Burkle -- from amassing enough shares to compete with the Riggios' controlling interest in the company. But this new letter helps set the stage for the shareholder meeting this fall, when three board members -- Michael Del Giudice, Lawrence Zilavy, and Leonard Riggio -- are up for re-election. Interestingly, as Burkle fights for a stronger foothold with B&N, he's leaving behind his board position with Yahoo (YHOO) after nine years.
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