Late Tuesday afternoon, the board of directors of Barnes & Noble announced that it was considering a sale of the nation’s largest bookstore chain. In an announcement, the B&N board said that in a bid to increase shareholder value it was exploring all strategic alternatives. Despite undertaking a number of new initiatives, including plans to invest $140 million to expand its digital sales capabilities, B&N’s stock price has performed poorly and the board said it believed its shares are “significantly undervalued.” At the close of trading Tuesday, and before the announcement, B&N’s stock price was selling at $12.84 per share, down from a 52-week high of $28.78. The stock opened at $15.90 when trading began Wednesday, indicating that investors belief a buyer will emerge.
There has been growing speculation that with its low stock price and trouble with outside shareholder Ron Burkle, B&N chairman Len Riggio would look to take the company private. In the B&N announcement, Riggio said he was considering the possibility of taking part in an investor group to acquire the company. In a statement, Riggio stated: “I fully support the Board’s decision to evaluate strategic alternatives at this time. Regardless of whether I participate in an investment group that buys the company, I, as well as the entire senior management team, am willing and eager to remain with the company and see it through the challenging years ahead.”
The B&N board has been engaged in a fight with Burkle over a poison pill provision it passed following Burkle’s acquisition of a significant stake in the company. Burkle sued to have the pill removed and a trial was held in July and a ruling could come at any time. Burkle has been pressuring B&N to take steps to improve the company’s stock price. In late June B&N held an investors conference at which it outlined a series of steps it planned to take to grow the company. Higher sales of e-books and the Nook as well as increased sales of print books through B&N.com are at the heart of B&N's strategy, although the company said it viewed its traditional bookstores as key assets and did not expect to close a significant number in tbhe near future. The presentation, however, did little to improve B&N's stock price with some analysts worried that B&N was investing too heavily in digital at the expense of profits, while others questioned how long bricks-and-mortar stores will remain viable.
The special committee named to review B&N’s options consists of four independent directors: George Campbell Jr., William Dillard, II, Margaret Monaco and Patricia Higgins. Lazard has been selected to serve as its financial advisor and Morris, Nichols, Arsht & Tunnell LLP to serve as its legal advisor. B&N said there was no timetable on how long the review process may take. The company was to hold its annual meeting in September, but no firm date has been set.