Geoff Gannon September 29, 2010

Barnes & Noble: What Happens Next? – Is This Yahoo and Microsoft All Over Again?

A reader sent me this email:

I believe your thesis was to be long because of a proxy battle and buyout of either Riggio or Burkle…It reminds me a bit of the YHOO MSFT situation where…MSFT would pay whatever, but the deal never got done and YHOO went in half.  You may be right that Burkle wants the company for $20, but at what point does he…walk away?  What do you think happens next here?

There are differences between Barnes & Noble (BKS) and Yahoo (YHOO). The biggest are:

  •  BKS is cheap; YHOO wasn’t
  •  Len Riggio owns 30% of BKS; Jerry Yang owned 4% of YHOO
  •  Ron Burkle owns 19% of BKS; Carl Icahn owned 6% of YHOO

Microsoft didn’t own Yahoo stock. So the positions of Microsoft, Yang, and Icahn were different from those of Riggio and Burkle.

Riggio, Burkle, and Aletheia own most of Barnes & Noble. They have money at risk. They can only get it out by selling in the market and driving down the stock price or selling in a deal.

Burkle is different from Microsoft or Icahn. Burkle didn’t start out wanting control of Barnes & Noble. He just wanted to be a big investor. He’s an influence investor not an activist like Icahn.

Burkle wants the best price. He doesn’t think he’ll get it from Riggio.

What’s next?

I expect Burkle and Riggio will argue about the Barnes & Noble sale process in court and in the press for the next 3 months.

Talk to Geoff about Barnes & Noble (BKS)

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