Barnes & Noble chairman plans offer for bookstore business

Tue Feb 26, 2013 3:57am IST

Portraits of Edgar Allan Poe and Walt Whitman are shown on the home screens of Nook readers from Barnes & Noble, which use technology developed by E Ink Corporation, in Cambridge, Massachusetts October 25, 2012. REUTERS/Dominick Reuter/Files

Portraits of Edgar Allan Poe and Walt Whitman are shown on the home screens of Nook readers from Barnes & Noble, which use technology developed by E Ink Corporation, in Cambridge, Massachusetts October 25, 2012.

Credit: Reuters/Dominick Reuter/Files

Related Topics

Stocks

   

REUTERS - Barnes & Noble Inc (BKS.N) said its chairman, Leonard Riggio, plans to make an offer for the company's bookstores, a deal that would result in splitting them off from the company's Nook device and e-book business, which has been losing ground to Amazon.com.

Riggio, who bought the original Barnes & Noble store in Manhattan in the 1970s and used it launch a national chain of big-box stores, would primarily offer cash and assume some of Barnes & Noble's debts, according to a filing on Monday with the Securities and Exchange Commission.

The offer would not include Barnes & Noble's Nook e-books and device business or its college bookstore chain, which are part of a separate unit created last year called Nook Media.

Barnes & Noble at the time said it was looking at strategic alternatives for Nook Media, including a potential spin-off, but has not given any updates since then.

Riggio, who owns nearly 30 percent of Barnes & Noble, did not disclose how much he would offer for the stores. Analysts said his success would hinge on satisfying John Malone's Liberty Interactive Corp. (LINTA.O), which owns preferred shares that are convertible into a 17 percent stake.

"This would allow the focus to go back to retail," Morningstar analyst Peter Wahlstrom told Reuters. "Nook is definitely a distraction- it sucks out all the profits."

Shares of Barnes & Noble closed up 11.5 percent to $15.06, valuing the company at about $900 million. The shares are still well below their 52-week high of $26.

The 2011 bankruptcy of Borders Group gave Barnes & Noble a short-lived reprieve from industrywide declines in book sales.

But during the 2012 holiday season, sales of books and other non-Nook products at stores open at least 15 months fell 3.1 percent and fewer people set foot in its stores.

Still, the retail business is attractive because it generates plentiful cash, much of which has been diverted since 2009 to develop the Nook devices and market them.

JOHN MALONE, WILD CARD

Barnes & Noble last month said it may close as many as a third of the nearly 700 superstores it operates in the United States in the next decade. Most of its leases are short-term, making it easy for the chain to scale down as needed.

Barnes & Noble had put itself up for sale in 2010, but its only offer came from Liberty Interactive. Liberty, however, backed down from an initial $1 billion bid and instead bought $204 million in preferred shares convertible for $17 apiece.

"The wildcard here is Liberty. They like Riggio but they have different interests," Maxim Group analyst John Tinker said.

FOUNDER-BUYER

Riggio joins the growing ranks of executives or former executives trying to buy the companies they founded, including Dell Inc DELL.O Chief Executive Michael Dell and Best Buy Inc (BBY.N) founder Richard Schulze.

Riggio in 2010 won a bitter fight for control of Barnes & Noble with investor Ron Burkle, showing how much he sees the chain as his "baby," Morningstar's Wahlstrom said.

Riggio, widely believed to be a billionaire, would have little difficult pulling off a deal, analysts said. In addition to his stake in Barnes & Noble, he made a windfall when the company spun off GameStop Corp (GME.N) in 2004.

He also sold Barnes & Noble the college bookstore chain, which he and his wife owned, for $514 million in 2009.

Janney Capital Markets, in a note to clients, said mounting an offer would not be "difficult" for Riggio.

Barnes & Noble said it had set up a committee made up of three independent directors to evaluate Riggio's proposal.

Evercore Partners will serve as financial adviser to the company and Paul, Weiss, Rifkind, Wharton & Garrison LLP will be legal advisers, the company said.

THE TROUBLE WITH NOOK

Microsoft took a 16.6 percent stake in Nook in 2012, and last month Pearson PLC (PSON.L) bought 5 percent, valuing the unit at about $1.8 billion. Barnes & Noble owns the remaining 78.2 percent.

Barnes & Noble launched the first edition of its Nook e-reader in 2009 to compete with Amazon's market-leading Kindle. Nook caught on with readers at first, helping Barnes & Noble garner as much as 27 percent of the U.S. e-books market.

But its popularity weakened in 2012 as Barnes & Noble branched out beyond its e-readers and into tablets, where it faced formidable rivals such as Apple Inc (AAPL.O) and Google Inc (GOOG.O).

Earlier this month, Barnes & Noble said the loss from the Nook business would probably be bigger than expected in fiscal 2013 ending April 28 and that sales for the year would fall short of the $3 billion it had forecast.

Revenue from Nook businesses fell 12.6 percent from a year earlier in the nine weeks ended December 29, even as Amazon reported rising sales of Kindles and e-books, leading many to wonder about Nook's long term prospects.

Barnes & Noble is scheduled to report third-quarter results on Thursday.

(Reporting by Phil Wahba in Toronto and Siddharth Cavale in Bangalore; Additional reporting by Olivia Oran in New York; Editing by Ted Kerr and Leslie Adler)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

APPLE

A shattered large glass panel, part of Apple's cube store on Fifth Avenue, damaged from the results of the snowstorm on Tuesday is seen in New York, January 22, 2014. REUTERS/Shannon Stapleton/Files

Apple e-book settlement gets court nod

Apple Inc won preliminary court approval for its $450 million settlement of claims it harmed consumers by conspiring with publishers to raise e-book prices. In approving the accord, U.S. District Judge overcame concerns she had expressed over a settlement provision allowing Apple to pay just $70 million if related litigation were to drag out.  Full Article 

Reuters Showcase

Patent Battles

Patent Battles

Microsoft sues Samsung in U.S. over patent royalties.  Full Article 

Facebook Back Up

Facebook Back Up

Facebook restores service after outage in many countries.  Full Article 

LinkdIn Growth

LinkdIn Growth

LinkedIn's hiring business seen key to growth  Full Article 

HP Settlement

HP Settlement

Hewlett-Packard to pay $32.5 million to settle USPS pricing case  Full Article 

Digital Teleporting

Digital Teleporting

Film world's cast of toys teleport into digital playground   Full Article 

China Hacking?

China Hacking?

Hacking attack in Canada bears signs of Chinese army unit - expert  Full Article 

P2i IPO

P2i IPO

Start-up behind 'dunkable' phone technology explores Asian IPO  Full Article 

BBM for Windows

BBM for Windows

BlackBerry opens up BBM to Windows phone users  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage