Leonard Riggio, the founder and chairman of Barnes & Noble Inc., has agreed to forgo $29 million from a sale of one of his companies to the book retailer in order to settle a shareholder lawsuit. The lawsuit stemmed from a 2009 agreement by Barnes & Noble, the largest U.S. bookstore chain, to buy back Barnes & Noble College Booksellers Inc for $514 million from Riggio. Shareholders sued Riggio, Barnes & Noble’s largest investor, alleging the deal overvalued the college bookstores and enriched Riggio at the expense of shareholders.
The transaction was one example of alleged poor corporate governance cited by investor Ron Burkle when he launched a proxy fight for a slate on the bookseller’s board in 2010. Burkle was the company’s second-largest investor at the time, but has since reduced his stake in the company to less than 1 percent. Analysts at the time questioned the wisdom of acquiring a chain with more than 600 bricks and mortar stores as more students and other book buyers were migrating toward digital book formats. Same-store sales at the college bookstore chain, which has 641 stores, are expected to be flat for the full year which ended in April and for which the company reported earnings on June 19th.
Currently, Riggio owns 29.8 percent of Barnes & Noble shares, according to reports. In April, Microsoft Corp said it was taking a 17.6 percent stake in a new Barnes & Noble subsidiary made up of its Nook digital business and its college bookstore chain. The lawsuit was a derivative action, meaning the shareholders essentially stepped into the shoes of the company to pursue Riggio for the harm done to Barnes & Noble. The recovery will benefit Barnes & Noble, and its shareholders will only benefit indirectly.
The settlement is subject to approval by Delaware Court of Chancery judge Leo Strine. The case is In Re Barnes & Noble Stockholder Derivative Litigation, Delaware Court of Chancery, No. 4813.
Source: Chicago Tribune
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