Issue of the week: The battle for Barnes & Noble

The tussle between Leonard Riggio and Ron Burkle for control of Barnes & Noble is highly entertaining—in a nasty sort of way, said Michael de la Merced in The New York Times. But the sound and fury “seem disproportionate to what is at stake.” Riggio, the bookseller’s “pugnacious” chairman, and Burkle, the billionaire pal of Bill Clinton who runs the Yucaipa investment fund, are fighting over a declining asset. B&N’s market value is less than $1 billion; its stock, which traded at $45 five years ago, now trades below $18. It badly trails Amazon.com in sales of electronic books, and its e-reader, the Nook, with only a 20 percent share of the market, is getting clobbered by Amazon’s Kindle, which has 70 percent. Aware that B&N’s “best days are behind it,” Riggio has put it up for sale and said that he might put together an investment group to take it private, said Douglas McIntyre in 247WallSt.com. That, at least, “would allow fools who believe in the retail book business to run the firm without damaging shareholders.” But it doesn’t explain why Burkle and Riggio are investing so much emotional energy fighting over a company whose prospects “peaked some time ago.”

There has been bad blood between the two men for years, said Andrew Rice in New York. Riggio, 69, was an investor—and, he claims, “the largest single sucker”—in a Burkle company that went bankrupt. The 57-year-old Burkle, for his part, has publicly accused Riggio of enriching himself at the expense of B&N shareholders and of packing the company’s board with yes-men. Burkle has launched a proxy fight to replace three board members with himself and two associates. Riggio has countered by accusing Burkle, who owns 19 percent of the company, and another investment fund, Aletheia Partners, which owns 15 percent, of scheming to take control of B&N without fairly compensating other shareholders.

For Burkle to win support for his proxy fight, he needs to roll out his “blueprint for growth” at B&N, said Jeffrey Goldfarb in Reuters.com. But if he and his fellow board candidates “have any bright ideas for a business facing structural decline,” he hasn’t shared them. He’s said to covet B&N’s vast real estate holdings, and he has floated the idea of partnering with a tech firm like Hewlett-Packard to make e-readers, but he hasn’t articulated a coherent turnaround strategy. “A smarter move might be to sell the company to Amazon,” said Richard Siklos in The New York Observer. But Riggio, who “built something distinct and culture-shaping” in Barnes & Noble, wouldn’t stand for that. If Burkle does have a plot for B&N’s “next chapter,” he’ll have to pay handsomely to write it.

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