WILMINGTON, Del. (CN) – Barnes & Noble will unjustly enrich its controlling shareholder Leonard Riggio and waste corporate assets to buy its own college books division for $596 million, shareholders say in a derivative action in Chancery Court.
With used textbooks available on the Internet and rental textbooks available for 40 percent to 70 percent off sale price, the college textbook business has entered “permanent decline,” says lead plaintiff the Louisiana Municipal Police Employees Retirement System.
Barnes & Noble’s offer to buy the College Booksellers division from company founder, chairman of the board and controlling shareholder Leonard Riggio offers far more than what a third party would pay to buy the floundering branch, the shareholders say.
The deal lacks transparency, since Barnes & Noble did not submit history or projections for the division’s performance, according to the complaint, which alleges that company directors approved the acquisition because they are indebted to Riggio.
Shares fell 8 percent and Credit Suisse downgraded the company to “underperform” shortly after the acquisition announcement, according to the complaint.
Buying the division will double the company’s exposure to a market that is already at risk, and reduces its cash on hand, according to the complaint.The shareholders sued Barnes & Noble, Riggio and eight company directors, including Riggio’s brother, Stephen, for breach of fiduciary duty. They are represented by Pamela Tikellis with Chimicles & Tikellis and Lewis Kahn with Kahn Swick & Foti of New Orleans