Barnes & Noble Sold to Hedge Fund

Towards the end of last week, Barnes & Noble Inc reported it will be bought by hedge fund Elliott Management Corp for $475.8 million. This will bring about the end of the one-time US book industry leader, transforming it to a private company as a means to rescue it from years of diminishing sales. 

And on that note, shares of the bookstore chain—still the largest in the United States—rose 11 percent, closing up 30 percent on Thursday. This is a stellar performance from a chain that first listed on the New York Stock Exchange in 1993, but struggled over the past decade (or so) in the face of online rival Amazon Inc, who quickly overturned the book sales market before coming an e-commerce giant. 

Noting that Amazon’s success came out of its technology, Barnes & Noble has attempted to make similar transition, but with little success. Even the introduction of platforms like the Nook e-book couldn’t compete with the quick rise of Amazon Kindle (and other similar tablets). 

You may not be aware, but Riggio acquired the flagship Barns & Noble trade name all the way back in the 1970s. This would be roughly one-hundred years after Charles Barnes first started the business out of his home in Illinois. As with any other independent business, he grew this firm by adding a handful of national retail stores, aggressively expanding throughout the 1980s. IN 1987, Riggio cemented the Barnes & Noble brand through the acquisition of all 797 B. Dalton Bookseller stores, to become the second-largest bookseller in the United States. But the company was not able to sustain the transition to the digital marketplace once Amazon stepped into the game. 

All this in mind, Elliott Management Corp’s offer equates to about $6.50 per share. This represents a premium of roughly 42 percent over Wednesday’s closing price.  It is a promising outcome at a time when Barnes & Noble has been exploring buyout options. Since last October, multiple parties have, indeed, shown interest; this even includes Barnes & Noble founder-chairman Leonard Riggio. 

Overall, the value of the buy would be around $683 million, including debt.  The sale is targeted for a close in the third quarter, though still awaiting federal regulator and shareholder and approval. 

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