Home Retailing & Marketing Barnes & Noble Acquired by Private Equity Firm

Barnes & Noble Acquired by Private Equity Firm

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The biggest shoe of all has just dropped in the book market: Barnes & Nobles, the last remaining big box book retailer chain, has been sold to a private equity firm, Elliot Advisors, PW reports.  This sounds a little dire, but Elliott also owns the British book chain Waterstones, which it purchased last year.
The deal was valued at about $683 million, which includes Elliott taking on B&N’s debt.

This is Elliott’s second purchase of a major bookstore chain in little over a year. In April 2018, it bought the U.K. chain Waterstones. When the B&N purchase is completed, expected to be in the third quarter of the 2019, James Daunt, CEO of Waterstones, will take over as B&N CEO as well. In the release announcing the deal, Elliott said that while each bookseller will operate independently, “they will share a common CEO and benefit from the sharing of best practice between the companies.” B&N will remain based in New York.

B&N founder and chairman Len Riggio will retire after 54 years running the company.
B&N has been in trouble over the last decade or so, pinched by the increasing sales of books on Amazon, but also by the rise of indie bookstores, Wal-Mart and Target. Last year a deal to sell the chain to W.H. Smith fell through, but not without somehow involving two lawsuits, and the abrupt dismissal of then CEO Demos Parneros. 
Despite its losses, B&N has a strong core business, and it’s widely believed that the publishing industry would do almost anything to keep it going – the closure of Borders all the way back in 2011 created all kinds of problems (and specifically lowered manga sales, a dip which they’re only now recovered from.)
The chain’s inability to reinvent itself and become more nimble under Riggio was a continuing source of frustration, however.  Waterstones under Daunt has been seen as a success story in the Amazon driven world. PW again:

Daunt, who took over as Waterstones CEO in 2011, has been given high marks for turning the chain around. When Elliott acquired Waterstones, it had revenue of about $557 million and operated 283 stores, considerably smaller than the 627 stores that B&N currently operates. Sales at B&N, however, have steadily declined in recent years. Elliott is betting that Daunt can apply a similar formula at B&N to the one he used to increase sales at Waterstones, which entailed making investments in stores and empowering local bookselling teams.

Accoridng to Yahoo, B&N stock was up last night as rumors of the sales swirled. (Under Elliott, B&N will once again be a private company, so no more juicy SEC filings.) They also added more analysis:

The acquisition will give Barnes & Noble “more leeway to work on a long-term strategy, even if it means pain in the short term,” said Seema Shah, a consumer discretionary analyst for Bloomberg Intelligence. “While this could improve profitability, the competitive landscape as a whole remains tough, so the success of this acquisition will depend on how Elliott can make BKS relevant again so that it can effectively compete with value and online players.”

Despite the relentless competition from Amazon, Barnes & Noble has managed to somewhat stabilize its business over the past few years, with revenue declines narrowing to a drop of 3.1% last year. The retailer still generates cash — sales were almost $3.6 billion last year — and the little outstanding debt on its balance sheet isn’t due until 2023. The company has also spent the past few years closing weak stores or moving them to better locations.

Althought no one wanted B&N to be acquired by a hedge fund, the Waterstones success story does give some hope (although Elliott had nothing to do with it.)
Obviously, this is a huge developing story which we’ll update as needed.
Here’s the PR in full regarding the sale:
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Barnes & Noble, Inc. (NYSE:BKS, “Barnes & Noble”) announces today that it has entered into a definitive agreement to be acquired by funds advised by Elliott Advisors (UK) Limited (“Elliott”) for $6.50 per share in an all-cash transaction valued at approximately $683 million, including the assumption of debt.

Elliott’s acquisition of Barnes & Noble, the largest retail bookseller in the United States, follows its June 2018 acquisition of Waterstones, the largest retail bookseller in the United Kingdom. James Daunt, CEO of Waterstones, will assume also the role of CEO of Barnes & Noble following the completion of the transaction and will be based in New York.

The $6.50 per share purchase price represents a 43% premium to the 10-day volume weighted average closing share price of Barnes & Noble’s common stock ended June 5, 2019, the day before rumors of a potential transaction were reported in the media.

The announced transaction with Elliott is the culmination of an extensive Strategic Alternative Review conducted by the Special Committee of the Barnes & Noble Board of Directors, which was announced on October 3, 2018. The Board of Directors of Barnes & Noble unanimously approved the transaction and recommend the transaction to Barnes & Noble shareholders. Leonard Riggio, the Founder and Chairman of Barnes & Noble, has also entered into a voting agreement in support of the transaction.

Barnes & Noble serves 627 different communities across all 50 states, where it remains the #1 bookseller in the United States. Elliott seeks to build upon this strong foundation as it addresses the significant challenges facing the bricks and mortar book retail space, applying a model that successfully turned around Waterstones over the past decade.

Following the close of the transaction, Elliott will own both Barnes & Noble and Waterstones, and while each bookseller will operate independently, they will share a common CEO and benefit from the sharing of best practice between the companies. Waterstones has successfully restored itself to sales growth and sustainable profitability, based on a strategy of investment in their store estate and the empowerment of local bookselling teams. Under Daunt’s leadership and Elliott’s stewardship, this commitment to bookselling excellence will strengthen the ability of both companies to navigate with success a rapidly changing retail landscape.

With respect to today’s announcement, Leonard Riggio, Founder and Chairman of Barnes & Noble, stated, “We are pleased to have reached this agreement with Elliott, the owner of Waterstones, a bookseller I have admired over the years. In view of the success they have had in the bookselling marketplace, I believe they are uniquely suited to improve and grow our company for many years ahead. I am also confident that James Daunt has the leadership ability and experience necessary to lead this great organization. I will do everything I can to help him make the transition smooth. Having been the leader of Barnes & Noble for 54 years, I have had the privilege of working with the very best people in all the world of bookselling, including our great store managers and booksellers, who work in our stores. It is they who have made Barnes & Noble the #1 most reputable retailer in America. My profound thanks, as well, to the entire publishing world, with whom we have shared a great relationship over the years, and the many suppliers who have provided vital services. Finally, to our tens of millions of wonderful customers and Members, it has been a privilege to serve them.”

In anticipation of his new CEO role at Barnes & Noble, James Daunt added, “I look forward greatly to working with the booksellers at Barnes & Noble. Physical bookstores the world over face fearsome challenges from online and digital. We meet these with investment and with all the more confidence for being able to draw on the unrivalled bookselling skills of these two great companies. As a place in which to choose a book, and for the sheer pleasure of visiting, we know that a good bookstore has no equal. I thank Mr. Riggio for his confidence, and I am grateful to Elliott for their commitment to support the continued transformation at Waterstones, and now also the same at Barnes & Noble.”

Paul Best, Portfolio Manager and Head of European Private Equity at Elliott, added, “Our investment in Barnes & Noble, following our investment last year in Waterstones, demonstrates our conviction that readers continue to value the experience of a great bookstore. We would like to acknowledge the contributions of Founder and Chairman Leonard Riggio and his team for creating the leading bookstore company in the United States. We look forward to working with James Daunt and the Barnes & Noble community of readers, members and booksellers as they start an exciting new chapter.”

The transaction is subject to customary closing conditions, including the receipt of regulatory and stockholder approval, and is expected to close in the third quarter of 2019. The merger agreement provides for the acquisition to be consummated through a merger structure. However, the parties expect to amend the agreement to utilize a tender offer structure, which is expected to reduce the time to closing by a number of weeks.

Dividend

Barnes & Noble also announced that it has declared a quarterly cash dividend of $0.15 per share, payable on August 2, 2019 to stockholders of record at the close of business on July 5, 2019.

Fiscal 2019 Year-End Earnings Announcement

Barnes & Noble separately announced that it will be reporting its fiscal 2019 fourth quarter and year-end financial results on June 19, 2019.

Advisors

Evercore is acting as financial advisor and Baker Botts L.L.P. is acting as legal advisor to the Special Committee of Barnes & Noble and Guggenheim Securities LLC is acting as financial advisor and Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to the Board of Directors of Barnes & Noble. Credit Suisse Securities L.L.C. is acting as financial advisor and Debevoise & Plimpton LLP is acting as legal advisor to Elliott.

About Elliott

Elliott Management Corporation manages two multi-strategy funds which combined have approximately $34 billion of assets under management. Its flagship fund, Elliott Associates, L.P., was founded in 1977, making it one of the oldest funds of its kind under continuous management. The Elliott funds’ investors include pension plans, sovereign wealth funds, endowments, foundations, funds-of-funds, and employees of the firm. Elliott Advisors (UK) Limited is an affiliate of Elliott Management Corporation.

About Barnes & Noble, Inc.

Barnes & Noble, Inc. (BKS) is the nation’s largest retail bookseller, and a leading retailer of content, digital media and educational products. The Company operates 627 Barnes & Noble bookstores in 50 states, and one of the Web’s premier e-commerce sites, BN.com (www.bn.com). The Nook Digital business offers a line-up of popular NOOK® tablets and eReaders and an expansive collection of digital reading and entertainment content through the NOOK Store®. The NOOK Store (www.nook.com) features digital books, periodicals and comics, and offers the ability to enjoy content across a wide array of popular devices through Free NOOK Reading Apps™ available for Android™, iOS® and Windows®. General information on Barnes & Noble, Inc. can be obtained by visiting the Company’s corporate website at www.barnesandnobleinc.com.

About Waterstones

Waterstones is the UK and Ireland’s leading high street bookseller with 293 bookshops, including Foyles, Hatchards, Hodges Figgis and branches in Ireland, Brussels and Amsterdam. It is the only national specialist book retailer of scale in the UK, and operates also through the e-commerce site, Waterstones.com.

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Barnes & Noble, Inc. (NYSE:BKS, “Barnes & Noble”) announces today that it has entered into a definitive agreement to be acquired by funds advised by Elliott Advisors (UK) Limited (“Elliott”) for $6.50 per share in an all-cash transaction valued at approximately $683 million, including the assumption of debt.
Elliott’s acquisition of Barnes & Noble, the largest retail bookseller in the United States, follows its June 2018 acquisition of Waterstones, the largest retail bookseller in the United Kingdom. James Daunt, CEO of Waterstones, will assume also the role of CEO of Barnes & Noble following the completion of the transaction and will be based in New York.
The $6.50 per share purchase price represents a 43% premium to the 10-day volume weighted average closing share price of Barnes & Noble’s common stock ended June 5, 2019, the day before rumors of a potential transaction were reported in the media.
The announced transaction with Elliott is the culmination of an extensive Strategic Alternative Review conducted by the Special Committee of the Barnes & Noble Board of Directors, which was announced on October 3, 2018. The Board of Directors of Barnes & Noble unanimously approved the transaction and recommend the transaction to Barnes & Noble shareholders. Leonard Riggio, the Founder and Chairman of Barnes & Noble, has also entered into a voting agreement in support of the transaction.
Barnes & Noble serves 627 different communities across all 50 states, where it remains the #1 bookseller in the United States. Elliott seeks to build upon this strong foundation as it addresses the significant challenges facing the bricks and mortar book retail space, applying a model that successfully turned around Waterstones over the past decade.
Following the close of the transaction, Elliott will own both Barnes & Noble and Waterstones, and while each bookseller will operate independently, they will share a common CEO and benefit from the sharing of best practice between the companies. Waterstones has successfully restored itself to sales growth and sustainable profitability, based on a strategy of investment in their store estate and the empowerment of local bookselling teams. Under Daunt’s leadership and Elliott’s stewardship, this commitment to bookselling excellence will strengthen the ability of both companies to navigate with success a rapidly changing retail landscape.
With respect to today’s announcement, Leonard Riggio, Founder and Chairman of Barnes & Noble, stated, “We are pleased to have reached this agreement with Elliott, the owner of Waterstones, a bookseller I have admired over the years. In view of the success they have had in the bookselling marketplace, I believe they are uniquely suited to improve and grow our company for many years ahead. I am also confident that James Daunt has the leadership ability and experience necessary to lead this great organization. I will do everything I can to help him make the transition smooth. Having been the leader of Barnes & Noble for 54 years, I have had the privilege of working with the very best people in all the world of bookselling, including our great store managers and booksellers, who work in our stores. It is they who have made Barnes & Noble the #1 most reputable retailer in America. My profound thanks, as well, to the entire publishing world, with whom we have shared a great relationship over the years, and the many suppliers who have provided vital services. Finally, to our tens of millions of wonderful customers and Members, it has been a privilege to serve them.”
In anticipation of his new CEO role at Barnes & Noble, James Daunt added, “I look forward greatly to working with the booksellers at Barnes & Noble. Physical bookstores the world over face fearsome challenges from online and digital. We meet these with investment and with all the more confidence for being able to draw on the unrivalled bookselling skills of these two great companies. As a place in which to choose a book, and for the sheer pleasure of visiting, we know that a good bookstore has no equal. I thank Mr. Riggio for his confidence, and I am grateful to Elliott for their commitment to support the continued transformation at Waterstones, and now also the same at Barnes & Noble.”
Paul Best, Portfolio Manager and Head of European Private Equity at Elliott, added, “Our investment in Barnes & Noble, following our investment last year in Waterstones, demonstrates our conviction that readers continue to value the experience of a great bookstore. We would like to acknowledge the contributions of Founder and Chairman Leonard Riggio and his team for creating the leading bookstore company in the United States. We look forward to working with James Daunt and the Barnes & Noble community of readers, members and booksellers as they start an exciting new chapter.”
The transaction is subject to customary closing conditions, including the receipt of regulatory and stockholder approval, and is expected to close in the third quarter of 2019. The merger agreement provides for the acquisition to be consummated through a merger structure. However, the parties expect to amend the agreement to utilize a tender offer structure, which is expected to reduce the time to closing by a number of weeks.
Dividend
Barnes & Noble also announced that it has declared a quarterly cash dividend of $0.15 per share, payable on August 2, 2019 to stockholders of record at the close of business on July 5, 2019.
Fiscal 2019 Year-End Earnings Announcement
Barnes & Noble separately announced that it will be reporting its fiscal 2019 fourth quarter and year-end financial results on June 19, 2019.
Advisors
Evercore is acting as financial advisor and Baker Botts L.L.P. is acting as legal advisor to the Special Committee of Barnes & Noble and Guggenheim Securities LLC is acting as financial advisor and Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to the Board of Directors of Barnes & Noble. Credit Suisse Securities L.L.C. is acting as financial advisor and Debevoise & Plimpton LLP is acting as legal advisor to Elliott.
About Elliott
Elliott Management Corporation manages two multi-strategy funds which combined have approximately $34 billion of assets under management. Its flagship fund, Elliott Associates, L.P., was founded in 1977, making it one of the oldest funds of its kind under continuous management. The Elliott funds’ investors include pension plans, sovereign wealth funds, endowments, foundations, funds-of-funds, and employees of the firm. Elliott Advisors (UK) Limited is an affiliate of Elliott Management Corporation.
About Barnes & Noble, Inc.
Barnes & Noble, Inc. (BKS) is the nation’s largest retail bookseller, and a leading retailer of content, digital media and educational products. The Company operates 627 Barnes & Noble bookstores in 50 states, and one of the Web’s premier e-commerce sites, BN.com (www.bn.com). The Nook Digital business offers a line-up of popular NOOK® tablets and eReaders and an expansive collection of digital reading and entertainment content through the NOOK Store®. The NOOK Store (www.nook.com) features digital books, periodicals and comics, and offers the ability to enjoy content across a wide array of popular devices through Free NOOK Reading Apps™ available for Android™, iOS® and Windows®. General information on Barnes & Noble, Inc. can be obtained by visiting the Company’s corporate website at www.barnesandnobleinc.com.
About Waterstones
Waterstones is the UK and Ireland’s leading high street bookseller with 293 bookshops, including Foyles, Hatchards, Hodges Figgis and branches in Ireland, Brussels and Amsterdam. It is the only national specialist book retailer of scale in the UK, and operates also through the e-commerce site, Waterstones.com.

7 COMMENTS

  1. Via its committment to turning Waterstones around, Elliott seems to be an actual hedge fund/venture capitalist firm rather than a vulture capitalist firm like Bain that behaves more like a legalized version of the Italian mob, larding up a firm with debt before dismantling it. So this turn of events looks promising … as long as they don’t end their once-or-twice-per-year 50% off sales on Criterion Collection discs. :)

  2. The last big book chain in America? Chapters/Indigo in Canada is doing ok, but it has a few advantages, a CEO (Heather Reisman) that is a genuine book lover and really champions books…and her husband Gerry Schwartz) that is the CEO of ONEX Corporation that I’m sure has helped her out in the lean times. I worked at Chapters/Indigo for many years and the GN section was always easy to steal from (along with 5e DnD books).

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