Throughout the trial, Riggio seemed most intent on countering allegations he saw as an affront to his reputation. All his intermingled interests, he told me, were the product of a long and successful history that stretched back to the beginnings of his business, selling textbooks to NYU kids. “If we start out with the first store we had, the bookstore, it spawned all these companies, so inevitably … by their very nature, they’re connected to one another,” Riggio said. “What do you want me to do, go away?”
Difficult as it may be to contemplate a Barnes & Noble without Riggio, he no longer fully controls the fate of his company. Burkle’s actions set in motion a chain of events that led to an announcement in early August that the board would be soliciting sale offers. “When he came on the scene, this thing was firmly in the hands of the Riggio brothers, whereas now it’s totally up for grabs,” said Lloyd Greif, a Los Angeles–based investment banker who is friendly with Burkle. “The question is, Is this something [Burkle] wants to jump-ball for?”
On this crucial issue, Burkle has thus far played coy. On August 18, I visited him in the living room of his downtown Broadway loft, a former private-events space furnished with a grand piano, an illuminated bar, and a fireplace with bare-breasted nymphs carved into its wood mantelpiece. “I’m not trying to get control, I just think that with the issues in front of the company, you need new, independent board members,” Burkle told me. Immediately after the Delaware judge’s decision, he announced that he would run a slate of candidates against the three company nominees—including Riggio himself—who are up for election to Barnes & Noble’s board at the annual shareholder meeting September 28.
“This is not a battle between Len and I, even though that’s what everyone wants it to be,” he told me. But in the next breath, Burkle said that now that Barnes & Noble’s board was looking for a buyer, he would certainly consider a bid. Indeed, back when he first invested, he had considered making a $25-per-share offer to shareholders, and with the stock currently trading at around $15, the company could almost certainly be had for less today. “I think people will continue to buy books,” Burkle said. “But even if we’re wrong, Barnes & Noble will still be alive for five or ten more years. They really should be the last store standing.”
“With Len, you’re either on the good-guy list or the bad-guy list,” says Burkle. “I’m on the bad-guy list.”
If Burkle thinks he’d make a better owner, he’ll have to get past Riggio, whose large stake remains a practical impediment. Some have suggested that a rapprochement between the two—allying to buy out the other shareholders—might be the most reasonable resolution. Burkle, however, rejected the idea. “I think it’d be hard to take anything private with Len,” he said. “He has way too many conflicts.” Before Burkle filed papers announcing his board challenge, the two sides had come close to negotiating a last-minute settlement, in which he would accept board seats in return for supporting Riggio, but the deal fell apart overnight. “With Len, you’re either on the good-guy list or the bad-guy list, and I think I’m on the bad-guy list,” Burkle said.
Riggio’s recent moves—such as his decision to exercise options to buy a million shares at an above-market price—suggest he is girding for a showdown. On the same day the board put the company up for sale, Riggio announced that he would be looking at putting together a bid. The financial rumor mill has bandied about names of a few possible outside buyers, but there’s been no notable enthusiasm, and Riggio may be calculating that he will be able to buy the chain on the cheap, because no one values bookstores as much as he does anymore. Sad to say, he’s probably right.
By taking the company private, Riggio could rid himself of a nemesis—assuming his offer is high enough to placate Burkle—and unshackle himself from the expectations of shareholders, who have objected to his redirecting cash from stores “into the teeth of the digital book revolution,” as a Goldman Sachs research report put it. This would free him to focus his efforts on reinventing the company around the Nook.
Of all the changes underway at Barnes & Noble, perhaps the most significant may be Riggio’s decision to appoint William Lynch as CEO. Lynch, who was previously an executive at the Home Shopping Network’s website, doesn’t work at the Barnes & Noble headquarters on Fifth Avenue but at the Chelsea offices of the web operation. He is still learning his way around the literary world—“My first year here was sort of a La Femme Nikita training on the book industry,” he says—and he sees his appointment as “a not-subtle signal” about the bookseller’s future. “We’re morphing into a retail and technology company. We’re purveyors of content, and I don’t think anybody at this company would say we sell physical books. We do sell that, but that’s not how we define ourselves.” As Lynch sees it, the superstores can serve as platforms for marketing their own replacement technology. Walk into any Barnes & Noble, and the first thing you’ll see is what Lynch calls the “shrine”—a counter where salespeople introduce the Nook.