Barnes and Noble has for years been controlled by the Riggio family, who own over a third of its shares, and Leonard Riggio is the firm’s CEO.
Burkle has made investments or has proposed investment in retailers from Barney’s, the high-end clothing company, to Supervalu, the food store chain.
Burkle’s argument for throwing the Riggio’s out is simple. They have let Amazon pass them by as it has taken the online book business over almost completely. Other retailers including Wal-Mart (WMT) have done well through e-commerce book sales, but Amazon took the heart out of the Barnes & Noble business.
Amazon has a market cap of $52 billion. In the last five years, its shares are up 250% while Barnes & Noble’s are down 50%. Amazon has recently seized the high ground in the e-reader business. Its Kindle has, by most estimates, 90% of the market. Barnes & Noble has its own product–the Nook. So far no research shows that it has made much of a dent in the Kindle’s lead.
If any product is likely to take business away from the Kindle, in the opinion of most analysts, it is the Apple (AAPL) iPad and not any product that Barnes & Noble can field.
Burkle’s biggest problem is what to do if he gets control of Barnes & Noble. It has done what it can to compete with Amazon online, but its push has been too little too late. Burkle could dismantle Barnes & Noble the way that Borders (BGP) has been taken apart. But, Border’s fortunes have not been helped by store closings and lay-offs. Burkle may believe that the real estate under Barnes & Noble’s stores has hidden value, and if he gets control of the company, it may be based on his gamble that the real estate is worth more than the book firm’s $1 billion market cap.
Barnes & Noble share rose 17% on the news of Burkle’s interest. That would put them at $21, still well below their 52-week high of $28.78. That fairly modest move up in the firm’s stock price may mean that Wall St. does not share Burkle’s enthusiasm about Barnes & Noble’s value.
Douglas A. McIntyre
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