Geoff Gannon September 26, 2010

Barnes & Noble: Delaware Law – When Will the Bidding Start?

A reader asks:

“Do you know what…Delaware law states about when Riggio can make a bid of his own? If Burkle wins, what do you think the odds are that Riggio will make a bid immediately?”

I don’t know what Delaware law says about when Len Riggio can bid for the company. Delaware law is cases like Unocal v. Mesa PetroleumRyan v. Lyondell Chemical, and Revlon v. MacAndrews & Forbes Holdings.

Revlon gives directors one job: “get the best price for shareholders at a sale of the company.”

Once two people make a bid for Barnes & Noble (BKS), the board’s job is to get the best price.

Reuters is saying:

“If Burkle doesn’t win at Tuesday’s shareholder meeting, sources tied to this…battle say he is likely to come back with a bid for the…store chain.”

They quote a consultant:

“Offers are likely to start soon after the vote, either from one of the losers or from buyers watching on the sidelines.”

I don’t see why Burkle or Riggio needs to bid immediately. And I don’t see why investors need the instant gratification. My average cost is $15.36 a share. I bought expecting a $20 a share bid. That’s a 30% return. Even investors who buy today – at $17 – would make 18% on a $20 bid. If it took 6 months, the annualized return would still be great. I’d worry more about the people and the business and less about the timing.

But I expect bids soon.