Founder may bid to buy Barnes & Noble
By Phil Wahba and Michele Gershberg |
August 5, 2010, Thursday
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Print Edition
Print Edition
BARNES & Noble, the number one United States book store chain, is putting itself up for sale as business suffers in the high-stakes battle for a leading role in the digital books market.
Barnes & Noble, whose shares soared 25 percent on the news, said company founder and top shareholder Leonard Riggio is considering bidding for the company as part of a larger investor group.
An auction for Barnes & Noble could draw interest from several other quarters, including billionaire investor Ron Burkle, as well as raise speculation about a combination with smaller rival Borders Group Inc. Shares in Borders rose 6 percent late on Tuesday.
But valuing a deal for Barnes & Noble, beset by competition from the likes of Amazon.com Inc and Apple Inc in the electronic books market, could prove difficult. The company's share price has lost more than half its value last year and its market capitalization was just under US$760 million as of Tuesday's close.
"How do you value an asset for the future when the entire market is being essentially turned upside down?" said Forrester analyst James McQuivey.
Morningstar analyst Peter Wahlstrom said the company was already trading close to his fair value estimate of US$13 per share before it made the announcement.
"This could make strategic sense for them, yes. But I don't want to exactly say it's a good decision," Wahlstrom said. Going private would allow Barnes & Noble to accelerate its investment in its digital book reader the Nook, competing with Amazon's Kindle and Apple's iPad, he said.
Law suit
Burkle sought a controlling interest in Barnes & Noble earlier this year and is suing the company for blocking his efforts through a plan that makes it harder to sell the bookseller.
Burkle has accused Riggio and directors of a "self-dealing scheme" to thwart his Yucaipa Cos from mounting an effective proxy contest or amassing significant voting power. He could not be reached for comment.
Hedge fund manager William Ackman, who holds a large stake in Borders, has in the past suggested the two companies could combine.
Barnes & Noble said it had formed a special committee of four independent directors to consider all options for increasing shareholder value. The company named Lazard as financial advisor and Morris, Nichols, Arsht & Tunnell LLP as legal advisor.
Pressure has been mounting since June, when it reported large losses on development for its Nook reader.
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