Yucaipa Cos. received a boost in its bid to gain seats on Barnes & Noble's board after Institutional Shareholder Services said investors should vote for its three nominees next week.
ISS sided with Yucaipa, the second-largest shareholder, after two proxy adviser firms recommended last week to vote for Barnes & Noble's nominees, which include the reappointment of the chairman and largest shareholder, Leonard Riggio.
Investors should also support a Yucaipa amendment to increase the maximum shares allowed under the company's takeover defense, ISS said.
“Dissident nominee (Ron) Burkle has invested a significant amount of his own wealth buying his stake in the company, and for that reason alone might be perceived as more aligned with the interests of outside shareholders than any of the incumbent directors,” ISS said Monday in a report to clients.
Barnes & Noble, the largest U.S. bookstore chain, and Yucaipa have sent news releases and letters to shareholders to make their case since Yucaipa filed a proxy on Aug. 12, a few hours after losing a lawsuit to overturn the so-called poison-pill provision. The proxy vote will take place Sept. 28 in New York.
ISS also recommended shareholders vote to increase the amount of shares that can be owned under the pill to 30% from 20%.
“While ISS has a track record of supporting dissidents, we believe its analysis is flawed and not in the best interest of our shareholders,” Barnes & Noble said in a statement.
Glass Lewis and Egan-Jones Ratings backed the company last week and advised voting against amending the pill. Both firms said the position of Aletheia Research and Management as the company's third-largest shareholder after Mr. Riggio and Mr. Burkle, with 15%, was a reason for siding with the retailer. If the threshold is increased to 30%, Aletheia could form a group with Yucaipa and buy Barnes & Noble without paying a premium, the companies said.