Sandell Asset Management Corp, which describes itself as a “private, alternative asset management firm,” sent a letter to Barnes & Noble’s board of directors this morning urging that the company try to sell itself.
In the letter, Sandell asked that B&N hire an investment banking firm to review its strategic options, which it said included selling out to a private equity firm or looking to do a deal with an Internet or media company. "It has become clear to us that all of the Company’s stakeholders would be better served if Barnes & Noble were operated as a private company or as a division within a larger company," Sandell wrote.
The firm said it believes B&N’s share price, which was $7.10 Monday, down 36% from the beginning of the year, is undervalued in part because investors have overreacted to the problems faced by brick-and-mortar stores. "Physical books, and physical bookstores, are not going away anytime soon," Sandell said.
In sending the letter, Sandell said it has accumulated a “meaningful” stake in B&N whose largest shareholder remains company founder and chairman Len Riggio. The Wall Street Journal first reported late Monday night that Sandell was preparing to ask that B&N consider putting itself on the block.
Commenting on the letter, B&N spokesperson Mary Ellen Keating said: “Neither Mr. Sandell nor anyone from his hedge fund has reached out to us yet, but, we welcome constructive dialogue with all of our shareholders.”
The Sandell proposal comes a few weeks after the retailer reported that sales fell 6.5% in the fiscal year ended April 29. The retailer has struggled to find a way to grow revenue since online retailing and e-books began drawing customers away from bricks-and-mortar stores.
Demos Parneros, who took over as CEO in April, said at the time of the earnings announcement this June that B&N’s focus in the current fiscal year will be on "ways to improve the business and reignite sales through an aggressive test and learn process."
Over the years, B&N has dealt with various proposals to be bought out, or to merge with another company. The most recent proposal came from Riggio who, in 2013, floated the idea of buying the B&N trade bookstores. Riggio's proposal arrived shortly after the company’s Nook Media division began to show signs that was facing financial trouble. Although Riggio never completed the purchase, one of the alternatives suggested by Sandell is that Riggio once again look to take the company private.
This article has been updated to include a comment from B&N.