Elliott to Acquire Barnes & Noble

Barnes & Noble has entered into an agreement to be acquired by Elliott Management in an all-cash transaction with an enterprise value of $683 million.

Beginning in October 2018, a special committee of the Barnes & Noble board of directors began a review to determine strategic alternatives for the company including a possible sale. The board of directors of Barnes & Noble has unanimously approved the Elliott transaction and Leonard Riggio, the founder and chairman of Barnes & Noble, is also supporting the transaction.

Through January 2019, Barnes & Noble had TTM revenue of $3.6 billion and TTM EBITDA of $111 million. This equates to an EBITDA valuation multiple of 6.15x.

The buy of Barnes & Noble follows Elliott’s acquisition in June 2018 of Waterstones, the largest retail bookseller in the United Kingdom. James Daunt, the CEO of Waterstones, will also assume the role of CEO of Barnes & Noble following the completion of the transaction.

“I look forward greatly to working with the booksellers at Barnes & Noble,” said Mr. Daunt. “Physical bookstores the world over face fearsome challenges from online and digital. We meet these with investment and with all the more confidence for being able to draw on the unrivalled bookselling skills of these two great companies. As a place in which to choose a book, and for the sheer pleasure of visiting, we know that a good bookstore has no equal.”

Mr. Daunt, a former JPMorgan investment banker, is the founder of Daunt Books, a mini-chain of six specialty book stores which he began in 1990 with the buy of a single store in London. In May 2011, he was named as the managing director of Waterstones by the company’s new owner, Lynwood Investments which is controlled by Russian billionaire Alexander Mamut. Lynwood sold Waterstones to Elliott Management in June 2018.

Barnes & Noble (NYSE: BKS) is the nation’s largest retail bookseller, and a leading retailer of content, digital media and educational products. The company operates 627 Barnes & Noble bookstores in 50 states, and the e-commerce site BN.com (www.bn.com). Barnes & Noble also operates The NOOK Store (www.nook.com) which sells digital books, periodicals and comics. Barnes & Noble is headquartered in New York (www.barnesandnobleinc.com).

Waterstones is the UK’s largest bookseller and has 293 total bookshops in the UK, Ireland, Brussels and Amsterdam. According to the company, it is the only national specialist book retailer of scale in the UK. Waterstones also sells products online through its e-commerce site Waterstones.com. The company, led by CEO James Daunt, had revenues of £402 million ($512 million) in 2018 and is headquartered in London (www.waterstones.com).

Since its acquisition by Elliot Management in June 2018, Waterstones has restored itself to sales growth and profitability by investing in stores and empowering local store managers to purchase and merchandise their books according to local market forces. Each branch of Waterstones now operates, to some extent, as an independent bookshop. In the bookselling industry, approximately 15% of books printed and delivered to bookstores go unsold and must be returned to their publishers. At Waterstones, the returned book percentage is now approximately 3%.

“We are pleased to have reached this agreement with Elliott, the owner of Waterstones, a bookseller I have admired over the years. In view of the success they have had in the bookselling marketplace, I believe they are uniquely suited to improve and grow our company for many years ahead,” said Mr. Riggio. “I am also confident that James Daunt has the leadership ability and experience necessary to lead this great organization. I will do everything I can to help him make the transition smooth.”

Elliott Management is an activist themed hedge fund led by billionaire Paul Singer (his middle name is Elliott). The firm, with $34 billion of assets under management, was founded in 1977 and is headquartered in New York (www.elliottmgmt.com).

“Our investment in Barnes & Noble, following our investment last year in Waterstones, demonstrates our conviction that readers continue to value the experience of a great bookstore,” said Paul Best, head of European private equity at Elliott. “We would like to acknowledge the contributions of Founder and Chairman Leonard Riggio and his team for creating the leading bookstore company in the United States. We look forward to working with James Daunt and the Barnes & Noble community of readers, members and booksellers as they start an exciting new chapter.”

Evercore is the financial advisor to the Special Committee of Barnes & Noble and Guggenheim Securities is the financial advisor to the Board of Directors of Barnes & Noble. Credit Suisse Securities is the financial advisor to Elliott.

The buy of Barnes & Nobles by Elliott Management is expected to close in the third quarter of 2019.

© 2019 Private Equity Professional | June 7, 2019

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