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Paul Singer's Elliott Management Sets Date With Barnes & Noble

- By James Li

Elliott Management, the activist hedge fund founded by Paul Singer (Trades, Portfolio), announced on Friday it has entered a definitive agreement in which Elliott will acquire Barnes & Noble Inc. (BKS) in an all-cash transaction valued at approximately $683 million, including the assumption of debt.


Per the transaction terms, Elliott will acquire Barnes & Noble for $6.50 per share, representing approximately a 43% premium to the company's 10-day volume-weighted adjusted share price as of June 5.

Barnes & Noble struggles in bookselling market

CNBC columnist Lauren Hirsch said Barnes & Noble has faced "continued pressure" from Amazon.com Inc. (AMZN), a company that had nearly 50% of new book sales according to a report from Codex Group. Walmart Inc. (WMT) had approximately 4.2% of new book sales.

GuruFocus ranks Barnes & Noble's profitability 4 out of 10 on several warning signs, which include operating losses over the past three years and a three-year revenue decline rate of 5.20%, which underperforms 83.98% of global specialty retail competitors.

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Transaction seeks to combine Barnes & Noble with major U.K. bookseller

In June 2018, Elliott acquired Waterstones, a U.K.-based bookseller that operates approximately 290 bookshops, including Foyles, Hatchards, Hodges Figgis and branches in Ireland, Brussels and Amsterdam. With the acquisition of Barnes & Noble, Singer's activist fund seeks to build on the U.S. bookseller's foundation and address the challenges facing the brick-and-mortar book retail space. The fund expects to apply a model that propelled Waterstones to "sales growth and sustainable profitability."

Barnes & Noble Chairman Leonard Riggio said he is pleased to have turned the company into one of the most reputable retailers in the U.S. over his 54-year tenure and that he has admired the U.K. bookseller over the years. Waterstones CEO James Daunt championed Riggio's confidence in leading the two companies, saying that Waterstones' management has overcome "fearsome challenges" from online and digital competition and that the company's investments enabled it to build on the bookselling skills of Waterstones and now Barnes & Noble.

The transaction is expected to close in the third quarter pending the receipt of regulatory and stockholder approval.

See also

Gurus with large holdings in Barnes & Noble include Lee Ainslie (Trades, Portfolio), Jim Simons (Trades, Portfolio), Philippe Laffont (Trades, Portfolio) and Chuck Royce (Trades, Portfolio).

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Elliott's top three new holdings for the quarter ending March 31 were eBay Inc. (EBAY), Bristol-Myers Squibb Co. (BMY) and Fox Corp. (FOXA). The $15.59 billion equity portfolio contains 67 stocks, with high portfolio weight in the utilities, energy and industrials sectors.

Disclosure: No positions.

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This article first appeared on GuruFocus.