Barnes & Noble investor urges sale of bookseller
Barnes & Noble shares soared Tuesday after an activist investor urged the company to sell itself, predicting that a private equity firm or e-commerce company could revive the beleaguered national bookstore chain.
The New York City-based company’s stock was up 16.9% Tuesday, closing at $8.30 per share.
Disclosing that it had amassed a “meaningful ownership stake” in Barnes & Noble, Sandell Asset Management, a private, alternative asset management firm, said the bookseller could attract bids of $12 a share or more in a “going private transaction.”
“It is our opinion that the public market for retail stocks is contributing to a risky and inhospitable environment under which the stock price of Barnes & Noble may not fairly reflect its intrinsic value anytime in the foreseeable future if it remains a stand-alone company,” Sandell said in the letter sent to the board of directors.
The letter said Sandell seeks a constructive “dialogue with the bookseller’s board.”
“Neither Mr. Sandell nor anyone from his hedge fund has reached out to us yet, but we welcome constructive dialogue with all of our shareholders,” said Mary Ellen Keating, a Barnes & Noble spokeswoman.
Barnes & Noble’s financial fortunes have slumped for years amid competition from e-commerce and delivery giant Amazon and a seemingly relentless consumer trend to buy books and other products online for cost savings and convenience.
The company’s market cap stood at roughly $518.5 million this week, a level the Sandell letter characterized as “unconscionably low” and said fails to reflect the bookseller’s “true value.”
Nonetheless, the letter contended that physical books and brick-and-mortar bookstores “are not going away anytime soon” based on their continuing appeal to voracious readers.
Amid that demand, Barnes & Noble’s 633 stores represent “beachfront property” that could attract highly profitable bids, the letter said. It cited, for example, Amazon’s $13.7 billion June offer to acquire Whole Foods and its 431 retail locations. Additionally, the bookseller’s low debt level and “robust” cash flow would make the company attractive to buyers, the letter said.
“Even at a purchase price of $1 billion, or close to double the current market value of (Barnes & Noble), such a price would be a ‘rounding error’ compared to the market value of a host of Internet or media companies looking for a retail presence,” the letter said.
As an added benefit of such a deal, “Barnes & Noble is already in the same fundamental business, namely the distribution of information,” the letter said.
While crediting Barnes & Noble founder and longtime leader Leonard Riggio for creating an “iconic company,” the letter also cited missteps and troubling transactions that occurred under his leadership.
Despite offering that criticism, the letter recommended that Riggio could try to take Barnes & Noble private “in a leveraged acquisition at a fair price for public shareholders, as he had publicly sought to do back in 2013.”