Barnes & Noble Loses Its Buyer, Left at the Altar

Barnes & Noble (NYSE: BKS) lost its buyer. Liberty Media will invest $204 million in the book reseller, although it is hard to understand why the company needs the capital, based on its balance sheet. The money is a paltry gift left behind as Liberty turned away from a buyout transaction.

Barnes & Noble tried to make the deal look like a victory. Leonard Riggio, chairman of Barnes & Noble, said, “We could not have found a better strategic investor than Liberty Media. Their investment is a strong endorsement of our overall business and the additional capital will further fuel the explosive growth of our digital strategy.”

Liberty also gets to put two directors on the Barnes & Noble board, a questionable governance move if there ever was one. It would be nice if the Barnes & Noble shareholders at least had a fair chance to vote for the two members. The company will expand its board to 11 seats to accommodate Liberty.

Liberty must have seen what investors have know for some time. The store-based book sales business is dying. Borders went under recently. There was no buyer for the company, so it was liquidated. Amazon.com (NASDAQ: AMZN) continues to dominate the industry, and its presence gets larger and larger as its e-book business leads the industry. Amazon also has the best-selling e-reader by far — the Kindle. Barnes & Noble markets a competitive product — the Nook. Barnes & Noble also has its own e-book operation. But Amazon launches new versions of the Kindle nearly every month, and its features continue to grow rapidly.

Barnes & Noble was left at the altar by Liberty Media. Liberty figured out that ownership of a book retailer is not worth it, even at a bargain price.

Douglas A. McIntyre