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

by Geoff Gannon

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 Petroleum, Ryan 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.