Elliott Acquires Book Seller Barnes & Noble For $683mln.

Elliott Acquires Book Seller Barnes & Noble For $683mln.
June 10, 2019


Elliott Management, a firm which uses its stake in a firm to put pressure on the management, announced its intention to take over Barnes & Noble, Inc. (NYSE: BKS), a bookseller, in an all-cash deal worth $683 million, including debt. Following the announcement, the stock of Barnes & Noble soared 11% to close Friday’s trading session at $6.62. This implies a 43% premium on the stock’s 10-day VWAP (volume weighted average closing share price). Notably, the shares of Barnes & Noble had lost about 25% so far in 2019, before the acquisition news came in. In the last five years, the market cap of Barnes & Noble has eroded by more than $1 billion.

Investors and speculators were also buoyed by a contractual condition, referred to as a “keep-shop” provision, which permits BKS to enter into a finer deal, if possible, before June 13th, without any penalty. The deal is anticipated to be completed in 3Q19 and will be organized as a merger. Both companies are planning to modify the contract to pave the way for a tender offer, which is anticipated to decrease the closing time by several weeks.

As announced earlier, on August 2nd, the retailer will pay out a quarterly cash dividend of $0.15 per share. In the merger agreement, Elliott has revealed that it is funding the merger to the tune of $700 million through an asset-based revolving letter of credit facility provided by Wells Fargo Bank, Bank of America and National Association. Additionally, Wells Fargo Bank, Carlyle Global Credit Investment Management, National Association, and Pathlight Capital Fund are providing a $125 million first-in, last-out asset-based revolving credit facility as well. Notably, Leonard Riggio, executive chairman and largest shareholder of Barnes & Noble has entered into a voting agreement support of the deal.

In pursuit of a bounce back, last year, Barnes & Noble revealed that it was studying a sale after receiving “expressions of interest” from “multiple parties,” including its chairman, Leonard Riggio, who established the book retail chain in 1965.

Analysts perceive Elliott’s bid for Barnes & Noble as reasonable and don’t expect a bidding war to happen. Following the merger, Barnes & Noble will have the freedom to implement operational changes and invest without being noticed by the public. Barnes & Noble is also implementing a turnaround plan that involves closing 600 stores throughout the US and shift to a compact showroom that offers a unique and modern look. The firm has stated that it’s model stores motivate shoppers to purchase books online.

The turnaround plans are already showing signs of reversal. Barnes & Noble reported a 1.1% y-o-y increase in March sales at stores which were open for at least a year. It is the most impressive quarterly performance seen since 2016. At the end of January 2019, the firm had $15 million in cash and equivalents. On its part, Elliott, the firm established and headed by billionaire Paul Singer, had acquired Waterstones, UK’s biggest bookseller, in 2018. Having ownership of two book retailers would result in operational synergy for Elliott. It will also enable Elliott to receive better terms from publishers. Notably, Elliott has stated that it will manage the two retailers separately, despite having James Daunt, present CEO of Waterstones, as the chief executive of both firms.

The merger news is anticipated to keep the stock in an uptrend in the days to come.

The historical price chart indicates that the stock has closed above its 50-day moving average. Furthermore, the MACD histogram reading has turned positive. As a result, we can expect the stock to remain bullish in the short-term.

barn - technical analysis - 10th June

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Richard W

Richard W

Richard is the guy who know everything there is about the financial industry, working in a top firm for over 15 years, he will give the lowdown on some of the biggest companies in the world

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