By Porter Anderson, Editor-in-Chief | @Porter_Anderson
Riggio: ‘I Believe in Our Mission’
This article has been updated from a write originally published on June 6.Following a flurry of articles late on Thursday following a Wall Street Journal report saying that “Barnes & Noble is nearing a deal to be bought by New York hedge fund Elliott Management Corp., according to people familiar with the matter,” statements from Barnes’ founding chairman Len Riggio and from Paul Singer’s Elliott offices confirm this morning (June 7) that the deal is in place.
Publishers Lunch’s Michael Cader writes that the deal is for “a modest $6.50 per share,” putting the value of the transaction at some $477 million, “plus the assumption of long-term debt makes the cash purchase ‘valued at’ approximately $683 million.”
James Daunt, who has had robust success with Waterstones since Elliott’s buy of the UK’s major bookselling chain on April 26, 2018, is to move to New York City later this year and is to run both companies—a daunting task, whether the pun is intended or not.
In a note to staff, Riggio writes:
“As you know, the Company has been seeking a new owner since October of last year. You should also know that there were many interested parties in the sale process, including others in our industry.
“The transaction will take several months to be completed since it requires a shareholder vote, and regulatory approval. During that time, our management team will work with James so that he can hit the ground running. They will also continue working on the many strategic initiatives, which are already underway.
“As it happens, I know James Daunt fairly well, and I am delighted to have him as our new leader. He is a bookseller through and through, and I expect he will make a big difference in our fortunes. Like me, James believes our culture has to be more store-centric, which means more localization of assortments and operations. It follows that he believes local managers must have more authority to get the job done.
“My profound thanks to Joe Gorman, Mary Ellen Keating, Al Lindstrom, Tim Mantel and Bill Wood for putting the Company on its best footing in years. Their leadership has made a big difference in our prospects in the years to come.
“Looking ahead, you should know that I will do everything in my power to help James during the transition and beyond. I believe in our people, and I believe in our mission. Working for a lifetime in a business that is consistent with my personal values has been nothing but a dream come true.”
Readerlink Had Been Mentioned as a Possible Buyer
While Bloomberg’s Lauren Coleman-Lochner, Scott Deveau, and Matthew Townsend have reported a “surge” in the bookseller’s stock on Thursday by “as much as 36 percent to US$6.24, the most since 2012” on the afternoon’s speculation, Cader also pointed to the fact that the stock closed yesterday at $5.95 a share. The surge, in other words, was at the very small scale of a long-beleaguered stock.
In early trading today, Friday, Bloomberg’s Anne Riley Moffat sees prices up to $6.46 per share, an 8.4 percent rise.
Lombardo and Trachtenberg had written that another potential buyer in the mix was Readerlink, the Illinois book distributor. BookExpo goers last week will recall that Readerlink’s president and CEO Dennis E. Abboud spoke in a discussion about the “Power of Retail” as part of a panel that also included Barnes & Noble’s chief merchandising officer, Tim Mantel.
At Crain’s Chicago Business, the reported presence of Readerlink in the mix made the lead in a pick-up of the Bloomberg report, headlined, “This Local Company Could Buy Barnes & Noble.” Readerlink is based in Oak Brook, and its description of its service has it as “the largest full-service distributor of hardcover, trade and paperback books to non-trade channel booksellers in North America.” The phrase “non-trade” refers to big-box retail outlets that carry books such as Target.
As it turns out, speculation about Elliott as the leading player was correct and Readerlink is not the buyer.
Daunt: ‘We Counter Amazon’s Siren Call’
In his Friday write at The Bookseller in London—where for a year the UK market has watched Daunt lead Waterstones under Elliott’s ownership to profitability and the opening of new stores—Philip Jones is quoting James Daunt, defining his new dual role in the context of Amazon’s dominance in the bookselling market.
Typically, however, Daunt subtly and intelligently points out that it can be a matter of “ease” as well as “some evident reason” to blame the retail struggles of the industry on Seattle:
In Jones’ write-up, Daunt says, in part:
“Physical bookstores the world over face fearsome challenges from online and digital, a complex array of difficulties that for ease and some evident reason we lay at the door of Amazon.
“Our purpose is to create, by investment and old fashioned bookselling skill, bookshops good enough to be a pleasure in their own right and to have no equal as a place in which to choose a book.
“We counter thereby Amazon’s siren call and defend the continued existence of real bookshops.
“We do so now with all the more confidence for being able to draw on the unrivaled bookselling skills of these two great companies.”
‘Relentless Competition From Amazon’
Coleman-Lochner, Deveau, and Townsend at Bloomberg on Thursday wrote, “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.”
At the same time, the Bloomberg article also pointed out that the chain’s effort to compete with Amazon’s Fire tablets with the Nook “was ultimately a bust” and that “internal drama” hasn’t helped.
And some in the publishing community are advising each other to look at Sheelah Kolhatkar’s article for The New Yorker from August about the chief of Elliott Management. In “Paul Singer, Doomsday Investor,” Kolhatkar depicts Singer as having a “unique, and immensely profitable, brand of adversarial investing.”
Singer, Kolhatkar writes, is an “activist investor,” a term used for someone who buys stock in a company “to make changes to its business, with the goal of improving the stock price.”