Disclaimer: as an employee of Barnes & Noble I’m one of the ‘assets’ that will be considered in any sale — a small part (.02% or thereabouts) of the field management team that actually runs the damn stores.
While B&N may sign my paychecks: My statements are my own, represent my own opinions and analysis, and were neither suggested by, vetted through, nor approved by my employer, and as always I run the [very slight] risk of getting fired over something I had the temerity to say in a public forum.
That, and I’ve been drinking for about 4 hours, and while that has nothing to do with my employment, in a spirit of full disclosure it likely colours the following analysis. ;p
The media is going to have fun with some of the possibilities and potential of the official press release, Barnes & Noble to Evaluate Strategic Alternatives, particularly after speculating for so long on the sale of Borders. Here’s an annotated, paragraph by paragraph translation, with highlights for key portions, and a bit of dramatization:
New York, NY – August 3, 2010 – Barnes & Noble, Inc. (NYSE: BKS), the world’s largest bookseller, today announced that its Board of Directors intends to evaluate strategic alternatives, including a possible sale of the company, in order to increase stockholder value. The Board came to this decision based on the price of Barnes & Noble shares in the marketplace, which the Board believes are now significantly undervalued.
Key phrases: ‘to increase stockholder value’, and that one at the end of the paragraph, ‘the price of Barnes & Noble shares in the marketplace, which the Board believes are now significantly undervalued’.
Nothing there about the company, or losses (or past profits for that matter), or potential, or performance. No changing publishing models, new hardware, or digital initiatives. Just the stock price. And if I owned 10 or 20 million shares of a stock, I’d likely be worried about the paper-profits-but-more-recently-losses too. Ah, yes, but the stock price is about investor perceptions and expectations and has very little to do with company performance or actual value, especially in a recession.
It’s a recession, we’re talking about retail, of course the stock is down. Duh. But I guess they felt they had to say [and do] something.
The process of evaluating strategic alternatives will be overseen by a Special Committee of four independent directors: George Campbell Jr., William Dillard, II, Margaret Monaco and Patricia Higgins, who will serve as Chair of the Special Committee. The Special Committee will consider all alternatives to increase stockholder value and will recommend a course of action to the company’s full Board. The Special Committee has selected Lazard to serve as its financial advisor and Morris, Nichols, Arsht & Tunnell LLP to serve as its legal advisor.
“See? Even when this special committee comes back with the result I want, I took pains to tell you it was independent, and we hired an accountant and a lawyer and everything“
Also note the use of the terms ‘all alternatives’ and ‘recommend’ — it still has to go to and through the full board of directors, no matter what the conclusions are
The Board stated: “As the world’s largest bookseller, Barnes & Noble has an iconic brand and unique competitive advantages we believe will position the company to succeed over time in a rapidly changing market. The Board is confident in Barnes & Noble’s strategy and fully supportive of the senior management team, which is delivering explosive growth in our fast-developing digital business. The Board has concluded that a review of strategic alternatives is the appropriate next step to take full advantage of our compelling digital opportunities and to create value for shareholders, customers, and employees.”
Here, they insert a direct quote into the press release to give the impression that this is an objective news article [see, it reads just like one, right?] and to also work in at least five nebulous ‘assets’ and ‘advantages’ of the company, along with Big Plans and Strategery and junk, all of of which “create value for shareholders” — oh, yeah, and the customers.
and? “And, um, do we have to bring up the employees? Yes? [*sigh*] OK, we also pay people to sell things. But they’re not as important as the Unique & the Digital & the Explosive! See, Wall Street? We had to mention that we pay people to sell books, but we mentioned it last. Can we a least get half-credit for that?”
Leonard Riggio, the company’s founder and largest stockholder, has informed the Board that, in light of its decision to explore strategic alternatives, he intends to consider the possibility of participating in an investor group to acquire the company.
This is chaff, cover, and whiffs ever so slightly of self-serving bullshit.
The board of directors is setting up an ‘independent’ committee to review ‘strategic’ alternatives, and the Chairman of that Board (who is also the largest shareholder) says, “Well, if you guys are looking at all the alternatives, and no really this just occurred to me, maybe I could just buy the whole mess outright.”
Wait, was this a PR relating relevant steps Barnes & Noble and its Board are taking in a tough market to secure their business and reassure skittish investors, or just a back-door way for Riggio to advertise that he wants to [perhaps fully intends to] take the company private, and you should buy in with him now while the stock price is cheap and the gettin’ is good?
Let’s ask Len – next ‘graph:
Mr. Riggio stated: “I fully support the Board’s decision to evaluate strategic alternatives at this time. Regardless of whether I participate in an investment group that buys the company, I, as well as the entire senior management team, am willing and eager to remain with the company and see it through the challenging years ahead.” Mr. Riggio continued: “Having spent a lifetime in bookselling and building this great company, I am as committed as ever to the future of Barnes & Noble.”
Might I be permitted a translation? “Hey Burkle: You think you know B&N, but you don’t know B&N. You can buy the stock, but you can’t buy the company, I’m the damn company. [*obscene gesture*] …and either me or a dozen people who think like me are going to be running B&N, still running B&N no matter who owns it, unless you plan to fire all of us—might as well cut the femoral artery—in the process of taking over.”
A number of other analysts will no doubt form different conclusions based on this surprise press release. Some Already Have. There is the now hoary 3-year old titter over a Borders/B&N combination — which is like buying two gas-guzzling clunkers instead of one, when what you really need is an electric bike — and 3-decades old ‘greed is good’ models of leveraged buy-outs and Profits For Everyone [except current shareholders, customers, employees, book lovers, and publishers]
Oh, and while market wet dreams and the merest hint of buyout encourage all the hyennas and vultures to salivate and circle ‘round, remember:
There can be no assurance that the review of strategic alternatives will result in a sale of the company or in any other transaction. There is no timetable for the review, and the company does not intend to comment further regarding the evaluation of strategic alternatives, unless a specific transaction is recommended by the Special Committee or the process is concluded.
This press release lands with a big splash, and yet: Nothing has been announced. In the end, maybe nothing will ever be announced.
It did have one effect, though: at time of posting, B&N’s share price was up 28% in after-hours trading. That’s all the Board wanted, after all, and in addition to goosing the stock price, this PR also has the handy side-benefit of pushing Kindle 3 news off the top of the link blogs and well out of the discussion. Barnes & Noble rumour mill = Media Win.
That’s my first impression; more to follow, as I now have to spend all of tomorrow figuring out just what this means.