On Friday, it looked like hedge fund Elliott Management was effectively purchasing the struggling book retail chain Barnes & Noble, but today it was announced that book distribution company Readerlink may put together a higher bid, causing many to speculate about a potential bidding war.
Back up. B&N is for sale?
Yep. The chain started accepting offers from buyers in October of last year.
Many, many reasons, but the short answer directly involves Amazon, a fierce competitor that generally offers the lowest prices on books in the industry, a massive inventory, and quick shipping – or, if you’re an ebook reader, instant delivery. In many ways, B&N’s struggles reflect other specialty superstore chains – Circuit City, Toys “R” US – who have struggled to compete against successful e-commerce giants.
B&N’s strategies for staying afloat included launching the Nook, the store’s exclusive e-reader. Unfortunately, sales for the Amazon Kindle blew the Nook out of the water. When the store’s ebook market failed to take off, the company announced in 2013 that it would close a third of its stores over the next 10 years.
The company has seen four CEOs over the past decade, two of which – Ronald Boire and Demos Parneros – were fired after a year on the job.
Why should I care if B&N fails? I shop at indie bookstores.
Indie bookstores are incredible – and they do so much more for their respective literary communities than sell books. That said, many areas of the country don’t have independent bookstores near them.
B&N may also be more likely to inspire impulse purchases than Amazon: When a consumer wants to purchase a book online, they generally type it into Amazon’s search function, add it to their cart, and move on. However, a customer who walks into B&N for Stephen King’s latest novel may walk out with two debut horror novels that caught her eye while browsing – a definite boon for those two debut authors.
And while they may be a corporate giant compared to your local mom-and-pop bookshop, they do still host book clubs and events with authors, sell literary journals not found in smaller shops, prominently feature staff recommendations, and generally offer a large floor plan with shelf space for a variety of authors whose titles might not get as much attention as the Gone Girls and Eat, Pray, Loves of the world.
“The loss of Barnes & Noble would have been catastrophic for the industry,” Carolyn Reidy, president and chief executive of Simon & Schuster, told the New York Times.
So who are the companies competing to buy B&N?
Elliott Management, a hedge fund, was the first to enter the arena, offering $476 million for the chain with plans to make it a private company.
Elliott is no stranger to the book retail market: Last year the fund acquired Waterstones, a U.K. national bookseller chain that turned troubling sales around by giving store managers more control over their stores and inventory. The chain’s CEO says he would do the same with B&N. “The Birmingham, Ala., bookshop, I imagine, will be very different from the one in downtown Boston,” he told the New York Times. This strategy would hopefully allow stores to better cater to their individual communities.
The newcomer in the field is Readerlink, the largest U.S. distributor of books to mass merchandisers. The company doesn’t have much time to put together a higher bid without facing a $17.5 million fee, however. “According to a securities filing, the merger agreement between B&N with Elliott contains a ‘keep-shop’ provision specifying that if B&N strikes a deal with a third party before 11:59 p.m. ET on June 13, Elliott would be entitled to a payment of up to $4 million. After that date, the breakup fee would be $17.5 million in cash,” writes the Journal.
So come June 14th, we should know who holds the keys to the book chain’s future.