August 3, 2010 NY Times
Biggest U.S. Book Chain Up for Sale
By JULIE BOSMAN In what might be the latest sign of trouble for brick-and-mortar bookstores, the mega-chain Barnes &Noble announced on Tuesday that its board was putting the company up for sale.
The news surprised analysts and alarmed publishers, who have watched as the book business has increasingly shifted to online retailers and e-book sales, leaving both chains and independent sellers struggling.
Barnes &Noble, the country’s largest book chain with 720 stores, said that its board believed the stock was “significantly undervalued” and that it had set up a special committee to review its options.
“Barnes &Noble has an iconic brand and unique competitive advantages we believe will position the company to succeed over time in a rapidly changing market,” the board said in a statement. “The board is confident in Barnes &Noble’s strategy and fully supportive of the senior management team, which is delivering explosive growth in our fast-developing digital business.”
The board has enlisted Lazard as its financial adviser and Morris, Nichols, Arsht &Tunnell as its legal adviser.
One possible bidder could be Leonard Riggio, the company’s founder, working with private equity, according to a person briefed on the matter. Mr. Riggio, 69, is the largest stockholder in Barnes &Noble, owning nearly 30 percent of the company.
“Regardless of whether I participate in an investment group that buys the company, I, as well as the entire senior management team, am willing and eager to remain with the company and see it through the challenging years ahead,” Mr. Riggio said in a statement.
Mr. Riggio has been under pressure recently from the billionaire investor Ronald W. Burkle, who last year increased his ownership stake in the company to about 18 percent. Mr. Burkle has argued for changes in Barnes &Noble’s corporate governance and has said that his Yucaipa Companies should be allowed to buy up to 30 percent of Barnes &Noble stock, though Mr. Burkle testified in court last month that he did not want to buy the company.
For years, Barnes &Noble has been battered by large shifts in the publishing industry and the retail environment. Book sales have moved toward big-box stores like Costco, Wal-Mart and Target, and away from mall-based stores like B. Dalton, which Barnes &Noble acquired in the late 1980s.
“There’s been a long series of pressures,” said David Schick, managing director at Stifel Nicolaus in Baltimore. “The market has not been kind to bookstores, and it’s for new reasons like competition with Apple and Amazon, and it’s for old reasons, like what we believe has been a decline in reading for the last 20 years. Americans have devoted less of what we call media time to books.”
But Barnes &Noble has made efforts to adapt to the changing landscape. Last year, it announced that it had acquired Fictionwise, an online e-book retailer. In March, the company promoted William Lynch, then the head of its Web division, to chief executive, signaling that it was pouring its efforts into the growing digital side of the business.
It has tried to compete with Amazon and Apple in the e-reader market by opening its own e-bookstore last summer, and by introducing its own device, the Nook, with versions selling for $149 and $199, as an alternative to the Amazon Kindle and the Apple iPad. In September, it will open 1,000-square-foot boutiques within its stores to promote the Nook.
One analyst said that consumers had been moving away from physical bookstores in favor of buying books online or at other retail outlets. “They might pick up a book when they’re buying hand sanitizer or Band-Aids, rather than actually seeking out a bookstore as a destination and then buying a book at that point,” said Michael Norris, senior analyst at Simba Information, which provides research and advice to publishers. “A lot of independents are figuring it out one bookstore at a time, and that’s what the Barnes &Nobles of the world have to do.”
Michael J. de la Merced contributed reporting.
COMMENT: At ATTMPress, we have stressed that the future of books in on-line sales. And, while we hate to see any outlet for literature in trouble, the handwriting is on the wall.