(CN) – In a struggle for control of Barnes & Noble, investor Ronald Burkle’s Yucaipa Cos. challenged a “poison pill” that prevents stockholders other than the founding Riggio family from controlling more than 20 percent of the nation’s largest bookstore chain.
Yucaipa American Alliance Fund sued Barnes & Noble founder and chairman Leonard Riggio, vice chairman Steve Riggio and the company’s board of directors in Delaware Chancery Court, alleging breach of fiduciary duty.
They asked a judge to changed the poison pill’s trigger to 30 percent.
Leonard Riggio controls about 30 percent of the company he founded in 1965, and is “by far the largest individual stockholder of B&N,” according to the complaint.
Yucaipa claims that board adopted the poison pill “shortly after Yucaipa’s public announcement that it intended to express its views ‘regarding the need for improved corporate governance,” and at the same time that the fund was purchasing a nearly 18 percent stake in B&N.
“The B&N Board has not identified any material benefit to the company’s public stockholders in adopting the poison pill,” according to the complaint. “Yet the benefits to the Riggio family and the board in ensuring that they will remain in control and office are obvious. This is particularly troublesome given the board’s failure to use an independent special committee when adopting the poison pill and the history of self-dealing transactions involving the Riggios.”
That history, Yucaipa claims, includes a deal in which the Riggios used the company as their “personal piggy bank” by selling College Booksellers Inc. to B&N “at an above-market price and interest rate.”
In addition to increasing the number of shares it takes to trigger the poison pill, Yucaipa wants the court to “make explicit that all members of the Riggio family cannot individually or collectively acquire any more common stock without triggering the poison pill,” among other things.
Barnes & Noble controls about 16 percent of the U.S. consumer book market.
Yucaipa is represented by David McBride with Young Conaway of Wilmington.