Barnes & Noble Puts Out ‘For Sale’ Sign
By Tom Ryan
Describing its stock as “significantly undervalued,” Barnes & Noble
(B&N) last week essentially put itself up for sale. As e-books erode its
brick & mortar business, pressure from shareholder
activists were said to have
prompted the move.
B&N stated: “The board has concluded that a review
of strategic alternatives is the appropriate next step to take full advantage
of our compelling digital opportunities and to create value for shareholders,
customers, and employees.”
B&N’s chairman Leonard Riggio, its largest
shareholder with about 30 percent of the company’s stock, told its board that
he intended to consider participating in an investor group to acquire the company.
any deal faces complications. A report from Reuters said Mr. Riggio
has not found any backers. Any interested PE firms would also have to reconcile
Mr. Riggio’s stake as well as an ongoing lawsuit against the company by Ron
Burkle, who owns 19.2 percent of B&N’s stock.
Ultimately, however, any
prospective buyers would have to bet on a B&N
On the positive side, analysts say Barnes & Noble’s brand remains
strong. It also managed to quickly garner a 20 percent share of the e-books
market and expects online sales to rise 75 percent to $1 billion this fiscal
“They still have a sizable business — they are the world’s largest physical
bookseller and that business probably has a very long tail,” Morningstar
analyst Peter Wahlstrom told Reuters.
Some also saw benefits from going
“Going head to head with Amazon and trying to become a different company
with the same investor base is tough,” Mike Serbinis, CEO of Kobo Inc.,
an online digital-book seller in Toronto, told The Wall Street Journal. “Going
private would enable them to transform the business without the pressure of
quarterly earnings. It’s hard to make the transition that they are trying to
make under the constant eye of the market.”
On the downside, any gains
in online sales might be more than offset by brick & mortar
declines. With fierce competition from Amazon and Apple, margins from online
growth are expected to be leaner than brick & mortar operations.
Veteran Journal reporter
Jeff Trachenberg noted that the irony that the once “fearsome retailing
force” that terrified both independent
book stores as well as publishing houses has quickly become antiquated through
“Anybody with their eyes open knows that the retail book market is increasingly
challenged,” Mike Shatzkin, chief executive of Idea Logical Co., a New
York consulting firm, told the Journal.
Discussion Questions: What do you make of the struggle for control of Barnes & Noble?
What does it say about the future of brick & mortar book retailing?
- Barnes & Noble
to Evaluate Strategic Alternatives – Barnes & Noble,
- Barnes & Noble on Block – The Wall Street Journal