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Will Barnes & Noble Proceed with Bookstore Buyout?

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Leonard Riggio, Barnes & Noble Inc.’s chairman and largest shareholder, has expressed interest in buying out the retailer’s consumer-bookstore chain, raising the possibility that the company could be split into two separate companies.

Mr. Riggio, who is 71 years old, built Barnes & Noble into a retail powerhouse in the 80’s and ’90s. He still controls about 30 percent of the company’s pubic stock.

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Early last year, Barnes & Noble released a statement that it was looking into dividing the Nook business from the rest of the company, although it has not elaborated on the proposal since then. However, a special committee of the board, currently advised by Evercore Partners (EVR), has been working on the separation idea.

Unfortunately for Barnes & Noble, the bookstore business has deteriorated rapidly in recent years. Customers are not only turning toward Amazon.com Inc. to buy their own print books online, they are using tablets, dedicated e-readers and smartphones to download e-books at home.

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Riggio’s expression of interest thus far has been only tentative, although one person close to the situation said he was expected to make a formal announcement this week, including a public disclosure of his interest. If granted, Barnes & Noble’s 689 retail stores would be taken private, separated from the company’s college-store chain and its Nook e-reader and tablet business.

Barnes & Noble's market capitalization totals about $809 million, which is down from $2.2 billion in 2001. The retailer's physical stores, however, remain a profitable business, producing $317 million in earnings before interest, tax, depreciation/amortization or Ebitda, in the fiscal year 2012.

The Nook business, which includes tablets, e- readers and e-books, suffered Ebitda losses of $262 million in fiscal year 2012. Earlier this month, Barnes & Noble said the Nook's losses for fiscal 2013 ending in April would be wider than the year before.

Source: Wall Street Journal