Barnes & Noble, Inc. announced this morning that it has signed a definitive agreement to acquire Barnes & Noble College Booksellers, the privately-held chain of college stores owned by B&N founder Len Riggio. B&N is valuing the purchase at $596 million, or $460 million after including B&N’s cash on hand. The college operation had sales of $1.8 billion in the fiscal year ended May 2 with comp sales growth of 1.0%, and although profits were not broken out, B&N said it would have earned an additional $121 million before EBITDA in the past year from the acquired properties.
B&N said B&N College will continue to be run out of its Basking Ridge, N.J., offices with Max Roberts remaining as president. The company operates 624 college bookstores serving about four million students. In a prepared statement Riggio explained the logic behind the deal: "Although both companies previously thrived as separate entities, owing to distinctions in their product offerings, the definition of textbooks and trade books has become increasingly blurred. This trend will accelerate with e-book offerings. Thus, combining both businesses on a single branded platform will enable the combined company to cross-promote print and digital offerings to all of our customers."
Irene Miller, a B&N board member who chaired the independent committee that reviewed the chance to acquire the college unit, said, "Reuniting the companies and bringing home the B&N brand is a big, big deal." The college operation was spun off after B&N bought the B. Dalton chain. The college group's position in the college market will bring a predictable revenue stream to B&N, Miller said, while making it easier for the two to work together to compete more effectively in both the e-book and traditional textbook market. B&N CFO Joe Lombardi said that while there will be some cost savings from the deal, the main driver was the chance for B&N to bring its expertise to the college store area to help college bookstores sell more trade titles and to improve their Web sites and e-commerce operations. Lombardi sees more opportunity in taking on the operation of bookstores from colleges who are looking to outsource those operations; B&N said its new contract pipeline should add $53 million in annualized sales.
Lombardi acknowledged that the college market is being rapidly changed by technology, but said the purchase "turns a threat into an opportunity," noting that in five to 10 years B&N expects to be selling "trade books, physical textbooks, and digital books online and through our stores."
The stock market gave the deal high marks in its initial reaction, boosting B&N's stock price by 12% when the market opened this morning.
