Hedge Fund Agrees to Buy Barnes & Noble, But Readerlink May Present Competing Offer

Book distributor Readerlink is planning to present a bid to acquire Barnes & Noble that would beat out the price hedge fund Elliott Management Corp. has offered to pay, the Wall Street Journal reported on Monday, June 10.

The nation’s largest bookstore chain, which has 627 stores across the country, had announced an agreement on Friday, June 7, to be acquired by Elliott for $6.50 a share ($475 million in cash). According to the WSJ, the deal would be worth $683 million including the assumption of B&N’s debt.

Elliott Management bought U.K. bookstore chain Waterstones last year for around $279 million, and if Elliott’s acquisition of Barnes & Noble is finalized, Waterstones CEO James Daunt would serve as chief executive of both Waterstones and B&N. According to the WSJ, under Daunt, Waterstones rebounded from a period of losses and is opening new stores; the chain now has about 290 stores in the U.K. and Ireland.

The auction process for Barnes & Noble got under way in October 2018 after the chain announced that multiple parties, including Readerlink, had expressed interest in acquiring the company. Since that news broke, potential buyers that have come to light have also included B&N executive chairman Len Riggio, who owns 19.2 percent of the bookstore chain.

According to a securities filing, Barnes & Noble’s agreement with Elliott specifies that if the bookstore chain manages to make a deal with a third party before end of day Thursday, June 13, Elliott is legally entitled to a fee of up to $4 million; the payment would increase to $17.5 million in subsequent days.

In the WSJ report on Monday, a person familiar with the situation told the financial news outlet that if Readerlink can get financing in place, it would consider making a bid at some point before the third-party deadline. The Oak Brook, Illinois-based company, which distributes books to non-book retailers like Target, Walmart, and drugstore and grocery chains, may also join with a financial investor to make the purchase, according to the source.

Over the years, Barnes & Noble has maintained its importance to publishers as a bookselling entity and industry influencer in part because of its usefulness for reader discovery of new titles and for launching author campaigns.

Although both Barnes & Noble and independent bookstores have struggled to compete with mega-online retailer Amazon for sales, indie bookstores have seen a resurgence in recent years, while B&N has faced slumping sales and several years of management turnover, including a legal dispute with former CEO Demos Parneros. According to the WSJ, B&N had $129.3 million in long-term debt as of January 2019.