[ad_1]
Text size
Barnes & Noble President Leonard Riggio.
Joel Arbaje; Photo Source: A. Messerschmidt / Getty Images
Barnes & Noble
arouses the interest of potential acquirers who recognize the potential of a company often described as a distressed retailer and
Amazon.com
roadkill.
Shares of the company (ticker: BKS) jumped 24% to $ 6.75 on Wednesday afternoon, after the announcement by the company that its board of directors "had decided to embark on a formal review process to evaluate strategic alternatives for society ". "Following the expressions of interest from multiple parties to make an offer to acquire the company, including" from Leonard Riggio, president and founder of 77 years of Barnes & Noble.
Riggio will probably be a key player in the next review because it controls about 18% of the company's shares, which gives it a considerable influence on the final result.
There may be more equity potential as even after the rally after normal working hours, Barnes & Noble has a low valuation relative to cash flow and now has a highly digestible market value of around 500 million dollars. The stock is considerably lower than the peak of nearly $ 14 in 2016.
Although Barnes & Noble has struggled against Amazon (AMZN) in recent years, and sales have declined, it remains profitable. Even after the increase in stock after normal business hours, the company is valued at less than four times its projected Ebitda (earnings before interest, taxes, depreciation and amortization) for its year ended in April. Its current forecast for Ebitda is between 175 and 200 million dollars.
This valuation reflects the value of the company's equity and debt of $ 179 million. Most retailers are valued at least six times the annual Ebitda. The low valuation based on Ebitda could attract financial buyers such as
Apollo Global Management
,
who bought Outerwall, the owner of the Redbox video kiosks, in 2016. Apollo is known for promoting value acquisition and turnaround situations.
Some see considerable potential for Barnes & Noble to increase profits, including better monetization of cafés located in the vast majority of its 629 stores. New York activist investor Rick Shottenfeld, whose firm took a 6.9% stake in the company, wrote in a document filed last month that it represented "a really unusual market in the retail sector. detail". He added that the cafes, run by the company and use coffee from
Starbucks
(SBUX), are "significantly undervalued compared to recent transactions in the coffee sector".
The interest marked for the cafes was emphasized by
Coca Cola
of the
(KO): $ 5.1 billion for the acquisition of Costa, a large UK-based channel.
According to Shottenfeld, the company could create a more urban atmosphere in its large underused bookstores by focusing on experiences such as reading clubs and children's birthday parties to distinguish themselves from the Amazon heavyweight.
Gabelli's analyst, John Tinker, upgraded his rating to Buy from Hold last month and awarded him a $ 10-a-share market value. Tinker cited coffee shops as "hidden assets". The company lacks CEOs following the dismissal of Demos Parneros in July.
The pressure exerted by Amazon does not let go, however. In addition to its dominant presence online. Amazon is in the process of deploying 17 physical stores. Today, an encouraging trend for bookstores is that e-book market share has capped less than 25% of the market. Many independent bookstores are in full swing.
Elliott Associates, a well-known investment firm, has bet on physical bookstores with the purchase of the first British channel, Waterstones, earlier this year, for about $ 280 million. Elliott paid about 75% of the chain's sales, while Barnes & Noble is valued at less than 15% of its sales for fiscal year 2018, which stood at $ 3.6 billion.
Barnes & Noble has been successful with innovations such as monthly reading clubs in many stores. The first event of the society's reading club, involving Female persuasion by Meg Wolitzer, was a success. The company could potentially do more by creating separate reading clubs, such as fiction and fiction clubs, as well as teen reading clubs.
The company could also lease some of its many stores to online retailers such as Casper, who sells mattresses, or Warby Parker, who offers glasses, to showcase their products. Many online retailers want to access physical locations so potential customers can see, touch and try their products. This could boost sales and reduce costly returns.
The publishing industry is also very interested in the possibility of considering Barnes & Noble as a viable counterweight to Amazon. Among the other initiatives, Barnes & Noble took steps to improve what was perceived as a dull website.
With more than 600 stores in generally wealthy areas of the country, there seems to be a lot of potential in the company that has not been captured by the depressed share price. Now that buyers are turning around, Barnes & Noble shareholders, who have been suffering for a long time, could get a profit.
Write to Andrew Bary at [email protected]
Source link
