A few days after it was revealed that investor Ron Burkle’s investment firm, Yucaipa Companies, had upped its stake in Barnes & Noble to 16.8%, the nation’s largest bookseller adopted a shareholder rights plan that will make it extremely difficult for any outsider to get control of the retailer. Under the plan, which B&N said was approved “in response to the recent rapid accumulation of a significant portion” of B&N stock, shareholders will receive rights to purchase shares of a new series of preferred stock in certain circumstances.
The rights plan will kick in if “a person or group,” without board approval, acquires 20 % or more of B&N’s stock or announces a tender offer that would give that party at least a 20% stake. The plan will also go into effect if a person or group already owning 20% or more of B&N stock acquires additional shares without board approval. The rights plan gives existing shareholders--except the person triggering the rights--to acquire B&N common stock at a 50% discount. The rights plan, B&N said, “is intended to protect the Company and its stockholders from efforts to obtain control of the Company that are inconsistent with the best interests of the Company and its stockholders.” It added that “consistent with Barnes & Noble's commitment to good corporate governance, the rights will expire in three years and the Company intends to submit the Rights Plan for stockholder ratification within 12 months.”
When Burkle made his SEC filing disclosing his new B&N holdings, he said he was “concerned with the adequacy and enforcement of the company’s corporate governance policies,” particularly as it pertained to the company’s purchase of B&N College Booksellers. In the filing, Burkle said his group intended to monitor B&N and communicate its views to the board as well as to potential strategic or financial partners. In approving the rights plan, Burkle received a clear message from the company whose largest shareholder remains founder Len Riggio.