Barnes & Noble, Inc.: The Yucaipa Proxy Challenge
(6 pages of text)
Ron Burkle is an activist investor and stockholder of Barnes & Noble, Inc. (BN). In September 2010, through his company, The Yucaipa Companies (Yucaipa), Burkle filed a “Definitive Proxy” to challenge BN’s slate of board-of-director nominees at the upcoming stockholder meeting. The proxy was made in response to a ruling against Yucaipa by the Delaware Chancery Court concerning a lawsuit that challenged Barnes and Noble’s poison-pill provision, which prevented outsiders from becoming majority stockholders. Burkle disagreed with BN’s founder, chairman, and owner of the majority stake in the company, Leonard Riggio, concerning BN’s long-term strategy. While Burkle wanted the company to cede ground to Amazon in the digital reader marketplace and instead concentrate on BN’s physical stores, Riggio believed that the Nook eReader should be the centrepiece of the company’s strategy. Riggio had to respond to the Yucaipa proxy in the short term and come up with a plan of action to retain control of the company in the long term.
The objectives of this case are to:
- Illustrate the nature of the market for corporate control for publicly owned companies.
- Examine the role of activist investors in influencing a company’s strategy.
- Introduce students to the agency relationship that exists between owners and managers.
- Analyze the choices open to a company in responding to an activist investor.
- Examine the practice of corporate governance.
New York, Large, 2010
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