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Activist shareholder continues pressure on family business despite set back

Despite losing his bid to remove a poison pill provision at family controlled Barnes & Noble, Ron Burkle, the activist investor, looks set to continue his pressure on the New York-based bookseller.

A court in Delaware ruled against Burkle's legal attempt to have the provision removed, which allows the founding Riggio family to remain as the company's largest shareholders with 34%.

Burkle owns just under 20% of Barnes & Noble through his Yucaipa Funds, the investment firm he founded in 1986, making him the second-largest shareholder after the founding family.

Barnes & Noble and Burkle had been attempting to come to an agreement that would have given the investor the right to name three of the nine board members at the US's largest bookseller in exchange for removing his attempt to gain greater control of the company. But shortly after the court ruling on 12 August, Barnes & Noble announced that the two parties "were unable to conclude an agreement on mutually acceptable terms."

This means the disagreements over the poison pill provision, which stops any outside shareholder gaining more than 20% of the company, will come to a head at the company's annual meeting of stockholders in September. Yucaipa has submitted a notice for shareholders to vote to change the provision from 20% to 30% and nominated three independent directors for seats on the board.

Burkle is unhappy with the drop in Barnes & Noble's share price, for which he blames the founding family. In a statement on 12 August, Yucaipa said: "In our view, this board's failure to act independently of the Riggio family's agenda has contributed to the company's poor stock performance, has enriched the Riggio family at the expense of the company's other stockholders, and has led to numerous corporate governance and strategic missteps."

Earlier this month Len Riggio, co-founder and chairman of Barnes & Noble, announced he was looking to increase his share in the company in order to consolidate the family's holding in the business. (Continue reading here)

Barnes & Noble's share price has come under considerable pressure in recent years because of competition from online bookstores including Amazon and new technology such as digital books and e-readers. Its share price has fallen by nearly two thirds in the last five years and now stands at $15 on 12 August 2010. 

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