G Asset Management seeks to buy majority share of B&N, or B&N’s Nook subsidiary

So what are we to make of this? An investment firm, G Asset Management, wants to buy 51% of Barnes & Noble in a deal working out to $22 per share. (Its current share price is $18.) This isn’t the first offer it’s made for the business, either. It offered $20 per share in November. If it can’t buy the whole thing, it wants to buy 51% of Barnes & Noble’s Nook business at $5 per share. The firm thinks that B&N should split its retail and Nook businesses.

The interesting thing to me is that, if B&N were to split its businesses, the half of B&N’s business that this investment group is specifically interested in is the Nook half. Why? Given that B&N has systematically mismanaged the thing for the last few years, and is only managing to keep afloat on the strength of its retail stores, why would an investment firm want the underperforming Nook side? It doesn’t exactly seem like the best investment. Do they think they can turn it around? (Or sell it to someone who wants to turn it around?)

Of course, Amazon has been going great guns with its e-book program. If there is room in the market for more than one vendor, B&N is about the closest thing Amazon has to a competitor that’s actually likely to be for sale. So they’re the best positioned to put up a good fight.

Or, perhaps, they might think they could break the Nook division up and sell its assets for more than they paid for the company as a whole?

According to Marketwatch, investors are skeptical G Asset Management can make good on its offer, given that it seems unlikely the company actually has that much cash on hand. An investment filing from a year ago indicates the company had raised only $1.75 million in securities sales. Buying B&N would take about $673 million.

In any event, it should be interesting to see what happens next.

2 Comments on G Asset Management seeks to buy majority share of B&N, or B&N’s Nook subsidiary

  1. GAM’s offer for NOOK Media is paltry. They’re offering about $150 million for a 51% share, when just a year and a half ago Pearson paid about $90 million for a 5% share. And prior to that, Microsoft paid $300 million for a 17.6% share. B&N would need to be desperate to unload NOOK Media to sell it at that price.

    The thing is… NOOK Media isn’t just NOOK. It’s also the college bookstores, which continue to be profitable. If GAM’s offer *were* accepted, they could shut down the NOOK side of the business and continue to run the college bookstores. Back in 2009, B&N paid almost $600 million for those college bookstores, so GAM would be getting them at about half of that price.

    The whole offer is kind-of iffy, anyway. From what I’m reading, GAM doesn’t seem to have any significant amount of capital on hand, and there are a lot of questions about how they’d possibly finance a deal this large.

  2. It’s worth noting this deal, at $22/share, is a transaction of about $600M in cash. It would give the buyer 51% share — Leonard Riggio controls about 31%, so this deal could get done without the founder family.

    How does this compare with other deals? Kobo was sold a year ago for $320M. Roku, a TV over-the-top vendor, is mulling an IPO. Netflix is apparently worth $26B; Facebook bought an “app” called “What’s App” for $19B … you have to wonder if this isn’t a bargain price. Nonetheless, the stock has been trading below $13/share as recently as last Sep …

    The deal sounds opportunistic AND realistic given the years of poor corporate management.

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