Ron Burkle is Busy Looking to Buy

Ron Burkle and his Yucaipa Cos. have stakes in quite a number of retailers, including A&P, Barneys New York, Barnes & Noble, Scoop and Whole Foods. Recently, Mr. Burkle has been making headlines as he has sought to buy bigger stakes in Barneys and Barnes & Noble.

In a public letter to Barnes & Noble's board last week, Mr. Burkle objected to a "poison pill" provision adopted by the company designed to keep him from raising his share in the company from its current 19 percent to 37 percent. The provision sets up roadblocks to keep single entities from owning more than 20 percent of the company, although current members of the board make up blocks greater than that amount.

Mr. Burkle specifically criticized Leonard Riggio, chairman of the company, and Stephen Riggio, its CEO and vice chairman.

"The fact that the Riggio family and other company insiders own over 37 percent of the outstanding stock, and that over the past three years Len was allowed to increase his personal stake by approximately 10 percent of the outstanding stock (to over 30 percent of the outstanding shares), in my view shows that the board and its chairman endorse two sets of rules: one for the Riggio family, and one for the rest of the company's shareholders."

Mr. Burkle also criticized Leonard Riggio for selling his textbook business to Barnes & Noble. The result was a reduction in the chain's liquidity while "burdening the company and its shareholders with significant debt to finance that purchase."

In the case of Barneys, Mr. Burkle appears to be coming in with a lowball offer to gain a controlling stake in the luxury retailer. According to a Wall Street Journal report, Mr. Burkle offered $50 million to acquire an 80 percent share of the retailer.

The current majority owner of Barneys, Istithmar World Capital, finds itself struggling with huge amounts of debt after acquiring the luxury fashion merchant in 2007 for $1 billion. Istithmar is reportedly not considering the offer.

"Our holiday performance exceeded our expectations, and Barneys remains cautiously optimistic for 2010," Vince Phelan, chief financial officer at Barneys New York, told the Journal. "No financial restructuring of the company is imminent."

Discussion Questions: What do you read into Ron Burkle's push to gain greater share of Barnes & Noble and Barneys? Would those companies be better off or worse with Mr. Burkle exerting more control over them?

• Ron Burkle Letter to Board of Directors of Barnes & Noble, Inc. - Yucaipa Cos./Securities and Exchange Commission
• Burkle challenges Barnes & Noble - Financial Times
• L.A.'s Ron Burkle bids for N.Y.'s Barneys - Los Angeles Times
• Burkle Angles for Controlling Stake in Barneys - The Wall Street Journal