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Barnes & Noble Evaluates Possible Sale

3 October 2018

From The Wall Street Journal:

Barnes & Noble Inc. said it is considering a sale of the company after receiving expressions of interest from multiple parties, including from the company’s executive chairman, Leonard Riggio.

The struggling bookseller on Wednesday said it would launch a formal review process to evaluate its strategic options. A special committee of the board will lead the review.

Barnes & Noble also said it has adopted a short-term shareholder rights plan, after observing “rapid material accumulations” of its stock by parties it can’t identify. The rights, which will expire in a year, would go into effect if a person or group acquires 20% or more of Barnes & Noble common shares without the board’s approval.

The plan would allow all rights holders to purchase preferred shares that are equivalent to the retailer’s common stock at a 50% discount. This would dilute the outsider’s holdings.

The company said Mr. Riggio, who has a 19.2% stake, will vote his shares in favor of any transaction recommended by the committee.

. . . .

Years of sliding sales and unsuccessful turnaround efforts have taken a heavy toll on Barnes & Noble. Its market capitalization has been sliced by more than two-thirds since 2015 to about $400 million. And there’s no sign of an end to the bleeding. For the full fiscal year that ended April 28, total sales fell 6% to $3.7 billion.

As its traditional retail business suffers, Barnes & Noble has struggled with its online offerings, where revenue fell 14% in the most recent quarter. On Wednesday, during the retailer’s annual shareholder meeting, Mr. Riggio said improving the company’s website was its top priority.

Link to the rest at The Wall Street Journal

PG says this level of visible turmoil at BN has to be a drop in the bucket compared to the internal turmoil in the organization. Anybody who is not flooding the world with résumés is living in an alternate reality.

As has been widely reported, the company has been operating on a $75 $750 million line of credit for several months. It’s difficult for PG to believe that whoever extended the line of credit (PG hasn’t seen the identity of the lender anywhere) has not included some substantial covenants and obligations that a floundering company is liable to violate. If the lender has the ability to pull back the line of credit and BN does something (or fails to do something) that triggers such a pullback, the bookseller might close down in a hurry.

Publishers small and large (and their authors) would likely take a substantial financial hit as well. Recall the mess that Borders left when it suddenly closed its doors a few years ago.

Bookstores

14 Comments to “Barnes & Noble Evaluates Possible Sale”

  1. What are the odds the committee recommends selling to somebody other than the guy driving down the value?

    • I imagine they would if they like the party making the offer, and the offer is large enough. They don’t want to lose control in the meantime (thus the poison pill) and I think Riggio’s name is there as a shill. That says “great company we have here, I’ll buy it if nobody else does.”

      I like the APs quote from Craig Johnson, president of Customer Growth Partners…

      “If it is Riggio, if he had some secret sauce to reinvent the bookstore for the 21st century, why hasn’t he done that in his time there?” Johnson asked.

      • ““If it is Riggio, if he had some secret sauce to reinvent the bookstore for the 21st century, why hasn’t he done that in his time there?” Johnson asked.”

        Maybe he wants to sink it as low as it can go so he can buy it cheap – though the ‘why’ is anyone’s guess.

        • Buy the corpse as cheaply as possible and then sell off the pieces for all they’re worth, which is a lot more than the whole is worth.

          There are quite a few vultures looking to plunder the corpse but Riggio wants to keep them at bay so he gets the plunder.

          The deal works best if the public shares outstanding are driven as low as possible first, hence the dividend play.

          The logistics backbone alone is probably already worth more than the market cap.

          The trick here is where the net gains go, to the board or all the stockholders.

          • The trick here is where the net gains go, to the board or all the stockholders.

            The senior VP of Liberty is on the board.

            And stockholders? Riggio and large funds own appx 90%. They are all players. I have zero sympathy for any of them.

  2. “Mr. Riggio said [improving] the company’s website was its top priority.”

    I don’t think he’s using that word like the rest of us might use it …

    “Barnes & Noble also said it has adopted a short-term shareholder rights plan, after observing “rapid material accumulations” of its stock by parties it can’t identify. The rights, which will expire in a year, would go into effect if a person or group acquires 20% or more of Barnes & Noble common shares without the board’s approval.”

    Let the stock games of pump-n-dump commence! 😉

  3. I think it’s a $750 million line of credit …. still, I agree with the possibility that this is someone pumping and dumping before the company crashes.

  4. if anyone believes B&N actually has serious buyers then I have a bridge I want to sell you

    • Serious buyers are a function of price. Just like books, bridges, or widgets.

    • As any Man (or Woman) knows, there’s a big big difference between an “expression of interest” and a “serious offer”.

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