Content Matters

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Barnes & Noble (BKS) is being put on the block due to its depressed stock price. Current market value is barely $750 million, making it a reasonably inexpensive purchase. The two most obvious suitors are founder Len Riggio and investor Ron Burkle, who currently owns about 19% of the company. But beyond those two, who might bid for the company? Some have suggested Amazon (AMZN), but I don’t see that happening. First, that deal would be unlikely to pass antitrust scrutiny. More importantly, the deal wouldn’t make a lot of sense for Amazon. In Barnes & Noble, they have a weakened competitor on both the traditional book and eBook market. The Amazon model is working and there’s no reason to burden it with the negatives of running a brick & mortar business. I’m sure that private equity firms will be in the mix (they always are) but won’t speculate on which ones might bid. Suffice to say that there will be other financial bidders here. Barnes & Noble might also gain attention from other traditional brick & mortar retailers. It could be an interesting purchase for Target (TGT) or Wal-Mart (WMT), but neither is very acquisitive and I’m not sure that it would fit either company’s business model nor culture. I think Barnes & Noble might have the most appeal to companies in the education market, perhaps someone like Blackboard, Incorporated (BBBB). B&N already operates numerous college bookstores and its textbook division remains a strength. More importantly, the Nook seems well positioned to become the delivery platform of choice for education. B&N and Blackboard recently signed a partnership for eTextbooks. Financially, a deal wouldn’t be that easy. Blackboard’s market cap is just $1.3 billion, so they would need help in financing a deal. But a combination of the two companies could establish the dominant player in the educational e-reader space. The Nook would have incredible branding (every time a student logs on to their Blackboard service) and would have both online and offline distribution.

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