Barnes & Noble [BKS] announced this morning that the company will acquire the privately-owned Barnes & Noble College operation principally owned by Len Riggio for $596 million, or about $460 million net of the college unit’s cash on hand. One major reason for the combination is the emergence of e-books and BN’s renewed attempts to build their online offerings and compete with Amazon. As Riggio says in the announcement, “Although both companies previously thrived as separate entities, owing to distinctions in their product offerings, the definition of textbooks and trade books has become increasingly blurred. This trend will accelerate with eBook offerings. Thus, combining both businesses on a single branded platform will enable the combined company to cross-promote print and digital offerings to all of our customers.”
Riggio is providing $250 million in seller financing for the transaction, and the rest will come from cash and BN’s little-used line of credit. Barnes & Noble has also announced “letters of commitment” to replace the two companies’ separate lines of credit with a new, $1 billion, four-year revolving line.
BN College ended its 2009 fiscal year on May 2 with sales of $1.8 billion and same-store sales growth of 1 percent. Operating 624 college bookstores, BN says the unit has a compound annual growth rate in sales of 6.2 percent over the past three years. Barnes & Noble expects the acquisition to boost earnings of the publicly-held company by 30 percent to 35 percent. That extra volume also gives BN renewed bragging rights as the country’s largest bookseller, surpassing Amazon’s North American “media” sales.
Irene Miller, who chaired a special committee of the board that oversaw the transaction, says “Reunifying the Barnes & Noble brand and
reintegrating these highly complementary businesses has long been a top
priority of the BKS Board. College has a leading position in a market
with excellent fundamentals and will add a very predictable and growing
revenue stream to BKS. In addition, in a rapidly changing environment,
both companies will benefit from a unified digital platform and brand,
which will enable the combined company to capitalize on the growing
online college textbook and electronic book markets.”