Burkle pushed back by Barnes & Noble

The book retailer is calling the L.A. billionaire unfit to be on its board as the company tries to ward off a potential proxy battle. "We believe Los Angeles-based investor Ronald Burkle is trying to take control of Barnes & Noble without paying you the premium you deserve for your shares," the board wrote in a letter to shareholders. Burkle, who owns about 19 percent of Barnes & Noble shares and wants a lot more, is running a slate of three directors, including himself, to be on the board. Leonard Riggio, chairman and largest shareholder (he has about 28 percent), is up for re-election and has been battling Burkle at every turn (he's also toyed about taking the company private). Mixed into this corporate stew is a poison pill provision that was put in place after Burkle accumulated large numbers of shares. From the letter:

Burkle began his scheme by rapidly accumulating millions of Barnes & Noble shares at about the same time as another Los Angeles-area investment firm, Aletheia Research & Management. Yucaipa and Aletheia have a history of investing in many of the same companies at about the same time, including Whole Foods, Wild Oats and A&P. Burkle claims he is not working together with Aletheia to gain control of Barnes & Noble, but can you really believe that?

Obviously Riggio & Co. don't.

Burkle now seeks your support to weaken the Shareholder Rights Plan so he and Aletheia could increase their stakes to 30% each - or a combined 60%. The 20% ownership limit in the Barnes & Noble Shareholder Rights Plan is the only thing stopping Burkle and Aletheia from jointly gaining control of the Company without paying a control premium - just as they did at A&P. Burkle didn't like the Shareholder Rights Plan and he sued the Company earlier this year. But guess what? He LOST. A court of law dismissed every single one of Burkle's numerous claims.

NY magazine has a piece this week on the Burkle-Riggio squabble that really goes back to late 2008 when Burkle acquired 8 percent of the company.

Burkle followed up by inviting Riggio to a meeting at Gemma, the restaurant at the Bowery Hotel, where he was living at the time. He had some ideas. Instead of chasing Amazon's technological lead, why not partner with Microsoft or Hewlett-Packard, which could use Barnes & Noble's prime floor space to showcase new devices? He'd also opened a discussion with hedge-fund manager Bill Ackman, the largest shareholder in Borders, which was close to bankruptcy. "I said, 'Len, there has to be at least one Borders store that you would love to have,' " Burkle would later recall. " 'And my guess is that there are a hundred Borders stores that you would love to have.' "

Riggio was wary. "Ron Burkle is a deal-maker," he later said in court, after their relationship had deteriorated into litigation. "He likes to put things together." But Riggio really didn't think much of the magnate's ability to run the companies that he mixed and matched, and he certainly didn't believe that Burkle understood bookselling. Riggio claims he told Burkle he didn't want him buying Barnes & Noble stock, and while there was nothing he could do about that, he certainly wasn't going to take his strategic advice about Borders.

The company's annual meeting, where board members will be selected, is on Sept. 28.