World Crisis Online

By Phil Milford

(Updates with company comment in fifth paragraph.)

March 4 (Bloomberg) — Barnes & Noble Inc., the largest U.S. bookstore chain, won a ruling from the Delaware Supreme Court affirming a lower-court judge’s decision that its poison pill is a valid anti-takeover defense mechanism.

Billionaire Ron Burkle’s Los Angeles-based Yucaipa Cos. sued New York-based Barnes & Noble last May in an effort to gain control of board seats. Delaware Chancery Court Judge Leo Strine validated the Barnes & Noble pill in August.

The pill “was a good, fair, reasonable response” to a threat to the company and its shareholders, Strine concluded. The five Delaware Supreme Court justices affirmed Strine’s ruling yesterday, following lawyers’ arguments.

Barnes & Noble shares fell 14 percent for the largest drop in almost eight months on Feb. 22 after the company suspended its dividend to conserve cash and invest in electronic books. The same day, the retailer said it would stop giving forecasts for the rest of fiscal year until more is known about newly bankrupt rival Borders Group Inc.

“We are pleased that the Delaware Supreme Court upheld the Chancery Court ruling, which recognized that the Barnes & Noble Board of Directors adopted an appropriate Rights Plan,” Mary Ellen Keating, a company spokeswoman, said in an e-mailed statement.

Frank Quintero, a Yucaipa spokesman, didn’t immediately return a phone messages seeking comment on the ruling.

Barnes & Noble fell 44 cents, or 3.4 percent, to $12.41 at 2:24 p.m. in New York Stock Exchange composite trading.

The case is Yucaipa American Alliance Fund II LP v. Riggio, CA5465, Delaware Chancery Court (Wilmington).

–Editors: Glenn Holdcraft, Fred Strasser

To contact the reporter on this story: Phil Milford in Wilmington. Delaware, at pmilford@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net