Free Annual Reports
Liberty Media Bids For Barnes & Noble
Liberty Media Corp. (Nasdaq:LCAPA) has offered $17 a share to buy Barnes & Noble (NYSE:BKS), the bookseller that put itself up for sale nearly a year ago. The offer is a 20% premium to Barnes & Noble's recent stock price.
TUTORIAL: Investor's Guide to Mergers and Acquisitions
Barnes & Noble For Sale
To say brick and mortar booksellers have been under pressure in the last few years is a colossal understatement. The bankruptcy of Borders Group in February was merely the confirmation of the obvious. Barnes & Noble, while not in the dire straits of Borders, has seen the once staid business of bookselling smacked by the effects of the digital tsunami. This shift has anointed a new leviathan, Amazon.com (Nasdaq:AMZN). Amazon now towers over the tattered brick-and-mortar booksellers. (For related reading, see Choosing The Winners In The Click-And-Mortar Game.)
Liberty, the Unexpected Suitor
Liberty Media, a mostly electronic conglomerate run by John C. Malone, is an unexpected but sensible suitor. Liberty's holdings include the QVC shopping network, Starz Media Group, and stakes in Sirius XM Radio (Nasdaq:SIRI) and Live Nation Entertainment (NYSE:LYV). John Malone has not had a history of investing in retail stores, though. (Learn how to invest in companies before, during and after they join together. For more, see The Merger: What To Do When Companies Converge.)
Digital Direction
Barnes & Noble, which has increasingly ramped up its e-book business to feed its successful e-book reader, the Nook, could benefit from the extensive digital tie-ins with Malone's holdings. Barnes & Noble would be under the Liberty Capital domain, according to Liberty Media, rather than its interactive group. Malone's insistence on Barnes & Noble's chairman Leonard Riggio, a well-respected figure, remaining to manage and retaining his holdings in the bookseller is a necessary part of the deal. (For more, see What Makes An M&A Deal Work?)
Barnes & Noble has perked up its online revenue and its digital sales. Last quarter, it did $319.4 million in online sales, an increase of 52%. Overall its same store sales were up 7.3% in the quarter ending in January, so the digital direction has begun to pay off. Along with the development of the Nook, Barnes & Noble has created an e-book library and continues to push digital sales.
More On The Proposed Deal
The structure of the offer by Liberty would find it assuming $450 million in Barnes & Noble debt, while Liberty would put $500 million cash in the deal - the rest would be financed. Malone has been likened to a Warren Buffett as he often buys distressed media companies with a friendly rather than hostile approach. He then leaves the management in place and utilizes the not always apparent synergies of his other holdings to strengthen the acquisition. His approach is long-term and favors fundamental operations, so in that sense is Buffett-esque. (For more, see Warren Buffett: How He Does It.)
Strategy For Barnes & Noble
The thought is that Liberty would be able to leverage its electronic expertise and properties to help further expand Barnes & Noble's Nook and e-book business. The failure of Borders to recognize the importance of pursuing a vigorous digital retailing strategy in the face of Amazon and the huge cultural book-buying shift contributed mightily to its failure. To survive, Barnes & Noble's obvious and necessary strategy is one of trying to position itself to reverse the role of the main and secondary businesses; digital will become king, if it isn't already.
Bottom Line
What then of the stores? There is some speculation that the stores will become device centers for the Nook, or mere portals for all the e-tailing, in a reversal of order of importance. Whatever happens there, the days of stand alone print, publishing and selling of physical reading material are numbered. Liberty is giving Barnes & Noble a great option for survival. Maybe it's not the only one, but it looks like a promising one. (E-tailing has changed the way consumers do nearly everything. Do you know how to pick the right company? For more, see A Primer On Investing In The Tech Industry.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
TUTORIAL: Investor's Guide to Mergers and Acquisitions
Barnes & Noble For Sale
To say brick and mortar booksellers have been under pressure in the last few years is a colossal understatement. The bankruptcy of Borders Group in February was merely the confirmation of the obvious. Barnes & Noble, while not in the dire straits of Borders, has seen the once staid business of bookselling smacked by the effects of the digital tsunami. This shift has anointed a new leviathan, Amazon.com (Nasdaq:AMZN). Amazon now towers over the tattered brick-and-mortar booksellers. (For related reading, see Choosing The Winners In The Click-And-Mortar Game.)
Liberty, the Unexpected Suitor
Liberty Media, a mostly electronic conglomerate run by John C. Malone, is an unexpected but sensible suitor. Liberty's holdings include the QVC shopping network, Starz Media Group, and stakes in Sirius XM Radio (Nasdaq:SIRI) and Live Nation Entertainment (NYSE:LYV). John Malone has not had a history of investing in retail stores, though. (Learn how to invest in companies before, during and after they join together. For more, see The Merger: What To Do When Companies Converge.)
Digital Direction
Barnes & Noble, which has increasingly ramped up its e-book business to feed its successful e-book reader, the Nook, could benefit from the extensive digital tie-ins with Malone's holdings. Barnes & Noble would be under the Liberty Capital domain, according to Liberty Media, rather than its interactive group. Malone's insistence on Barnes & Noble's chairman Leonard Riggio, a well-respected figure, remaining to manage and retaining his holdings in the bookseller is a necessary part of the deal. (For more, see What Makes An M&A Deal Work?)
More On The Proposed Deal
The structure of the offer by Liberty would find it assuming $450 million in Barnes & Noble debt, while Liberty would put $500 million cash in the deal - the rest would be financed. Malone has been likened to a Warren Buffett as he often buys distressed media companies with a friendly rather than hostile approach. He then leaves the management in place and utilizes the not always apparent synergies of his other holdings to strengthen the acquisition. His approach is long-term and favors fundamental operations, so in that sense is Buffett-esque. (For more, see Warren Buffett: How He Does It.)
Strategy For Barnes & Noble
The thought is that Liberty would be able to leverage its electronic expertise and properties to help further expand Barnes & Noble's Nook and e-book business. The failure of Borders to recognize the importance of pursuing a vigorous digital retailing strategy in the face of Amazon and the huge cultural book-buying shift contributed mightily to its failure. To survive, Barnes & Noble's obvious and necessary strategy is one of trying to position itself to reverse the role of the main and secondary businesses; digital will become king, if it isn't already.
Bottom Line
What then of the stores? There is some speculation that the stores will become device centers for the Nook, or mere portals for all the e-tailing, in a reversal of order of importance. Whatever happens there, the days of stand alone print, publishing and selling of physical reading material are numbered. Liberty is giving Barnes & Noble a great option for survival. Maybe it's not the only one, but it looks like a promising one. (E-tailing has changed the way consumers do nearly everything. Do you know how to pick the right company? For more, see A Primer On Investing In The Tech Industry.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Greg Sushinsky
Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Free Annual Reports
