By adding nearly two million shares of Barnes & Noble stock to its existing holdings late last month, Aletheia Research & Management brought its stake in the nation's largest bookseller to 17.5%, making the investment firm the second largest outside shareholder in B&N, trailing Yucaipa, which has an 18.7% stake. Aletheia has been steadily building its position in B&N for several months, and the newest round of share purchases, along with the letter Yucaipa founder Ron Burkle sent to the B&N board in late January attacking the adoption of a poison pill, has raised questions in the book industry about who these firms are and what their intentions may be toward B&N.

Burkle is more well-known than Peter Eichler, who founded Aletheia in 1997. Burkle started Yucaipa in 1986 and made his fortune by acquiring a number of supermarket chains and then selling them to Kroger in 1998. He is a friend of the Clintons, and among his many other ventures, he tried, and failed, to buy the Tribune Company with Eli Broad. Aletheia has about $6.2 billion in holdings, with few investments in retailers. Aletheia, however, is a major shareholder in the A&P supermarket chain, in which Yucaipa also has a stake (and where recently departed Borders CEO Ron Marshall is now head).

There are two schools of thought about the aim of Aletheia and Yucaipa. One is that they are counting on Borders going bankrupt, thereby giving B&N the kind of market dominance in the U.S. that Indigo Books and Music enjoys in Canada. The prospect that B&N could be the sole surviving national bookstore chain is an appealing prospect for investors, especially based on Indigo's results. In the just-concluded third quarter, Indigo posted solid gains in sales and earnings—including comp sale increases of 3.4% for its superstores—while B&N and Borders both struggled over the holiday period. If B&N is unable to consolidate its position in the bookselling marketplace, Yucaipa and Aletheia could team up to persuade B&N chairman Len Riggio to take the company private. Although Riggio has done very well since B&N became public, he hasn't always enjoyed the extra scrutiny heading a public company brings. However, he does enjoy running the company that he and other company insiders hold a 37% stake in, and any deal would likely need to keep Riggio at the helm.

At press time, the B&N board had not yet responded to Burkle's letter. In any event, the intentions of both firms should become clearer as the B&N annual meeting gets closer. That meeting, which had been held in early June in the past, will be held sometime in September this year following the decision to change B&N's fiscal year to one ending May 1. In his letter questioning the poison pill provision, Burkle said its adoption makes it impossible for his firm to be on an equal footing with the Riggio family at the next annual meeting, a position no one has occupied since Len Riggio has headed B&N.