Recently, Barnes & Noble announced that it would enter into a formal review process to evaluate possible strategic alternatives for the company. More specifically, the Board of Directors has appointed a special committee to review possible parties looking to make an offer to acquire the nation’s largest retail bookseller.
Why Now, Barnes & Noble?
Founded in 1873 as Arthur Hinds & Company, Barnes & Noble has been around for quite a long time now. After many mergers and bankruptcies in the book retail industry, Barnes & Noble is the longest standing book seller in the nation. However, with the likes of Amazon’s (AMZN - Free Report) Kindle on the rise, e-book culture has started to take over many of these brick-and-mortar book stores.
Even though, Barnes & Noble has other products such as the Nook, there still seems to be a decline in sales, according to The New York Times. Now, Barnes & Noble is looking for ways to stay afloat amidst companies like Amazon, Target (TGT - Free Report) and Walmart (WMT - Free Report) , all places where e-books and physical books are sold. However, there must be some reason this bookstore giant is still in business.
After Barnes & Noble’s announcement of a potential sale of the company, shares soared before the market even opened today. BKS closed up almost 22% today as a result, and the stock is up 33% over the past six months. Today’s move shows that investors are hopeful in Barnes & Noble, and still see some value in the struggling bookseller.
In Barnes & Noble’s first quarter report, the company posted a decline in sales from the previous years. Even after cutting expenses, there still seemed to be something wrong. Len Riggio, chairman of Barnes & Noble, stated that the company’s short- and long-term focus will be to grow their top line, in efforts to improve cash flow. Even though the company incurred a loss, with the holiday season coming up, it could potentially see an upward sales trend during the upcoming months.
In the past year, Barnes & Noble received an offer to take the company private from Sandell Asset Management Corporation, as well as many activist investors taking interest in the company. At the time, Barnes & Noble saw Sandell’s offer to be infeasible and therefore rejected it and focused on cutting costs. A year later, the company has decided to go forward with the process of evaluating potential investors to take the company private with consent from Riggio himself. Although it seems confusing as to what made the company change their mind from the previous year when they were faced with a similar problem, it seems clear that Barnes & Noble is looking for ways to stay in the industry just a little longer.
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