In a plot twist worthy of a Tom Clancy mystery novel, the founder of the country’s largest bookstore chain wants to get back to the business of selling books.
Barnes & Noble Inc. (NYSE:BKS) announced on Monday that Leonard Riggio, the company’s founder, chairman and largest shareholder, may propose to purchase all of the assets of Barnes & Noble’s retail business, including its chain of bricks-and-mortar bookstores and its website, barnesandnoble.com. The proposal would not include Nook Media LLC, through which the company manufactures its struggling Nook e-reader, nor would it include Barnes & Noble’s college-bookstore business.
In a Schedule 13D regulatory filing with the Securities and Exchange Commission, Riggio said the proposed buyout of Barnes & Noble would be primarily in cash and negotiated with the board and its advisors.
Although the Nook is viewed as as a costly digital albatross around Barnes & Noble’s neck -- while at the same time it's considered by many to be the company's best chance for survival in a changing marketplace -- the Nook has never managed to garner more than 25 to 30 percent of the e-book marketplace, compared with 60 percent for Amazon.com Inc. (NASDAQ:AMZN) and its ubiquitous Kindle devices.
Although the Nook is a strong revenue booster for Barnes & Noble, research and development of the product is expensive as e-reader devices are constantly evolving. It's expected that losses in Nook Media will be greater than they were the year-earlier period when the company reports fiscal 2013 third-quarter earnings on Thursday. Earlier this month, the company warned that annual revenue for the Nook unit will fall far below the $3 billion it projected in January. To make matters worse, the company said in January that it plans to close between 450 and 500 stores over the next decade.
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Late last year, Barnes & Noble announced that it is selling a 5 percent stake in Nook Media to the British publishing company Pearson PLC (NYSE:PSO), which is attempting to capitalize on the growing market for educational e-books.
Barnes & Noble said in a press release on Monday that it could not guarantee whether Riggio’s buyout proposal would result in a transaction. The company said it did not intend to comment further, nor would it offer a timetable for negotiations. Upon the announcement, however, Barnes & Noble shares jumped 9.3 percent to $14.76 on Monday morning.
The first Barnes & Noble bookstore was opened by William Barnes and G. Clifford Noble in 1917. Riggio purchased the rights to the name in 1971 and founded Barnes & Noble Inc. The Fortune 500 company currently operates 689 stores in 50 states.
Shares were up 1.3 percent Tuesday morning to $15.22.