Barnes &
Noble has a potential deal in place to sell
itself to hedge fund Elliott Advisors for $683 million, marking
major changes for a company that has long struggled to stay afloat in the wake
of Amazon’s continued rise. Representing the last of the major
traditional bookstore chains, Barnes & Noble could be in the hands of a
firm that already has turned around one bookseller that had teetered on the
brink of failure: UK-based Waterstones. James
Daunt, CEO of Waterstones, will assume the role of CEO of Barnes & Noble
following the expected completion of the transaction in Q3 2019.
However, Elliott isn’t the only entity seeking to reverse
Barnes & Noble’s fortunes — book reseller Readerlink LLC is
reportedly working on a higher bid for the retailer.
The RTP editors discuss whether a Barnes & Noble
acquisition (whether by Elliott Advisors or another party) can help turn the
brand around.
Adam Blair, Editor: I’m at least somewhat optimistic about
the prospective new owners of Barnes & Noble, particularly since incoming
CEO James Daunt has had book retailing experience. I hope he imports the kind
of locally-led assortments that have proven successful at Waterstones and also
in the U.S. at chains like Half
Price Books. Carefully listening to what local readers are interested
in, and stocking stores accordingly, is what has kept the country’s remaining independent
booksellers afloat in tough times. One recommendation for the new owners:
revamp the Barnes & Noble loyalty program. I’m an ex-member who got tired
of being charged $25 per year for no appreciable benefit. Amazon can get away
with charging for Prime membership because they bundle exclusives, content and
free, fast shipping, but Barnes & Noble isn’t Amazon — nor should it try to
be. Keep making the store a place that’s a pleasure to visit and you’ll get my
loyalty.
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Glenn Taylor, Senior Editor: Upon first glance, the
Barnes & Noble bid made me question the price: $683 million?? (Or, a
less pricey $475 million when not accounting debt.) Frankly, I thought
that number was outrageous given the company’s failed
attempts at reinvention in the past, its inability to generate consistently
positive traffic numbers and its rotating carousel of CEOs (now on number
six since 2010). It’s even crazier when you think that the figure
represents a 43% premium over its share price. Looking deeper into this
though, I’d like to be optimistic about the buyer, Elliott Advisors. It’s easy
to give hedge funds and VC-types flak for retail purchases like these (and they
certainly have deserved it in recent years), but Elliott’s turnaround of
Waterstones instills confidence that the company has a firm grasp of
bookselling in the digital age, and that’s what matters most here. This feels
more like a genuine attempt at a resurgence than a typical investment, largely
due to Daunt’s involvement. Regardless of the ownership change, Barnes &
Noble will have to close more stores (or at least align with the small-format
trend), retool its inventory entirely (catering to its market), emphasize BOPIS/click-and-collect
and endure short-term hits to its revenues and profitability.
Bryan Wassel, Associate Editor: I’ll admit I’m of two
minds about Elliott Advisors’ ultimate plans for Barnes & Noble. While the
firm has been supportive of Waterstones, its involvement didn’t come until that
chain had already stanched the bleeding and started expanding again. That’s a
great point for VC money to come on board — the extra cash can ease the
growing pains of expansion plans, and the recent increase in profitability
limits the incentive to tear the chain apart in search of a return. On one
hand, giving the reins at Barnes & Noble to Daunt, as opposed to a
sacrificial lamb whose only purpose is to quietly prepare the company for
liquidation, speaks to the idea that Elliott is serious about financing a
turnaround. On the other hand, the U.S. market is incredibly different from the
UK, and America simply may no longer be capable of supporting a bookstore chain
the size of Barnes & Noble. After all, there hasn’t been a truly national
supermarket since the mid-20th century heyday of A&P, and we saw
how that story ended. If Barnes & Noble’s suitors are looking to say, “We
tried, but the company was doomed before we arrived,” they will certainly have
ample cover.
