In the recent decision of Yucaipa American Alliance Fund II, L.P. v. Riggio et al, the Delaware Court of Chancery upheld the adoption and use of a rights plan by the board of directors of Barnes & Noble, Inc. as a good faith and reasonable response to a stockholder’s rapid open market accumulation of the company’s stock. Vice Chancellor Strine held that the familiar two-pronged analysis set forth in Unocal Corp. v. Mesa Petroleum was the appropriate standard of review and that the board was reasonable in adopting a 20% trigger rights plan while permitting the company’s chairman and his family to maintain an approximately 30% stake, and in refusing to raise the trigger threshold to enable two significant stockholders to jointly run a proxy contest.

View full M&A Alert, "Delaware Chancery Court Upholds Barnes & Noble's Rights Plan"